The Greek debt crisis, a slowdown in the Chinese economy, and a rate hike by the Federal Reserve could lead to a stock market crash, according to one economist.
In an interview with CNBC last week, Renaissance Capital Chief Global Economist Charles Robertson outlined three major risks that could roil financial markets in the coming weeks. (Source: CNBC, last accessed July 13, 2015.)
“[First], we’re seeing just how fragile it is with that Greek crisis right now. The second risk was China—that’s always a possible problem which could provoke something much worse. The third is something along the lines of a Fed (rate) hike,” Robertson stressed.
Greece has been suffering from a severe financial crisis and has failed to make its debt payment to the International Monetary Fund (IMF) last month. After months of intense negotiations and so many setbacks, finally Greece and its creditors reached a conditional agreement to bail out the country for three more years in exchange to tough reforms in the country’s pension and fiscal policies.
Despite the bailout rescue plan, Robertson told viewers, “The number of people working and able to provide tax revenue to the government is going to go down, causing the Greek debt to remain unsustainable.”
Turmoil in Europe could be bad news for investors here at home. According to Robertson, U.S. stock markets could be due for a major selloff later this year. While the S&P 500 is trading at 2,100, Robertson anticipates that the index will drop down to 1,100 in March of 2016—representing a nearly 50% decline in equity prices.
Interestingly, he did suggest to investors that if equity markets dropped by half, it would present a “massive buying opportunity.”