Stock Markets Crash of 2006


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A Mid-May meltdown in emerging markets and commodities has pressed the panic button of fund managers globally. In the past month mayhem nearly 2 trillion of wealth has been wiped out.

What markets had gained in last 6 months is wiped out in one month and this knee jerk reaction is attributed to hike of interest rates by Federal Reserve to control inflation. The growing fear among the market analysts is that with increasing interest rates and inflation there is an increasing chance of economic slowdown.

With concerns over US economic slowdown the emerging economies soon follow and most of them crashed by almost 20 to 25 % in the past month. According to , investors have withdrawn almost 8.5 billions from the emerging markets equities in last one month.

What’s in store for the future?

The early 2006 rally is now thing of past and the market looks more bearish than bullish. In fact it will be a great surprise if the markets able to touch their mid-may high anytime sooner than couple of years.

In short to medium term the stock market looks range bound until fresh infusion of money in economy and job creation targets are achieved.

Economic indicators

Increasing crude oil prices has start putting strong pressures on companies’ bottom lines. With no way out Iraq any sooner and Iran crisis looming large, the oil prices will certain to spiral higher putting a big question mark on growth prospects.

Germany and France deep into a slumber, Europe doesn’t seem like the next engine of growth in the world hence all signs are indicating a prolonged downturn or at best flat markets across the world.

Boris Mann did his Master's in finance. He regularly advises clients on personal finance issues. He also writes term papers from time to time for You can contact him for any financial term paper query.


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