The stock market is up substantially since its March lows. The question is, what could derail it?
There’s four possibilities that are being discussed.
The big one we keep hearing is inflation. That doesn’t appear to be likely; for there to be an inflation problem, there needs to be wage pressure, meaning that employees would be able to demand higher wages – and in this environment, that’s not going to happen any time soon.
That’s in part due to unemployment. If unemployment gets too high, that also could send us back into another recession, and cause stock prices to come back down. As long as unemployment stays around ten percent, though, that level is already baked into the stock prices, meaning that it’s unlikely unemployment issues would cause another recession.
Another concern is energy cost. It is a bit of a problem, but for it to be a significant problem, we’d probably have to be at $110 to $120 for a barrel of oil. In the near term, anyway, that doesn’t appear likely.
One final cause of another possible recession is rising interest rates – and that is a problem. As the nation continues to issue trillions of dollars in debt, it could continue to push interest rates higher. If they do, it will push mortgage rates up, and could stall our housing recovery – and that could be a big cause for concern.
