Global stock market can lose 50% of its value in the next twelve months
Sam Adelton
Jun. 29, 2008

One thing that the stock markets cannot tolerate is the higher interest rates resulting from higher inflation. The oil price spike has created energy inflation. Bio-fuels trying to replace petroleum products have created a hyperinflation in food and other essential commodities. In countries like India, China and Middle East, the commodity inflation has induced wage inflation. The developed economies in US, Japan and Euro zone face severe stagflation.

The lower purchasing power of the consumers is affecting all the stock markets. Even the stock markets in the Middle East have started declining. India and China are leading in the bear markets. The bubbles were the biggest in these Asian giant economies. They are expected to suffer the most.

The developed economies are also very vulnerable at this stage. Every country except Brazil and Canada is suffering from fiscal mismanagement. Overall the worldwide economies can lose 50% value overt the next twelve months.

Large cash on the sideline supports US stock market. However, if the credit meltdown continues, the Dow Jones Industrial Average can fall below 6,000 level by end of 2009.

Oil is the major commodity to watch. If oil breaches $175 mark, the world wide stock market will not have any choice but to sing global depression.

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