Wall Street investors are preparing themselves for the worst year in the US stock market since 2008. There are several events contributing to this downfall, including the vague policies outlined by the Federal Reserve. Furthermore, the devaluation of the Chinese Yuan, combined with a crash in oil prices and slower earnings growth, are not helping matters either. More Wall Street investors are flocking towards Bitcoin and blockchain technology firms, and that trend is likely to continue for quite some time.
Also read: Reinventing Money: Bitcoin and Fiat Unlikely Allies?
Traditional Wall Street Investing Taking a Major Hit
It is no secret that the traditional stock market is slowly falling apart, as the financial crisis of 2008 is still sending shockwaves through the financial world. Even though 2015 still has a bit of gas left in the tank, things aren’t looking bright when taking the whole year into account. Financial experts expect a small increase for the US stock market by the end of 2015, albeit it would still be chalked up as a loss overall.
Prices of any commodity with a respectable value are influenced by pessimism, one of the major human emotions. All of 2015 has been rather negative for the stock markets around the world; worrying news and events have increased pessimism levels all across the board. With pessimism, prices will go lower and lower, as investors are more itchy to sell stocks at the slightest hint of a downtrend — either for small gains, or to recoup losses.
Keeping these numbers in mind, 2016 needs an explosive start to make up for the 3% deficit in the stock markets from 2015. Depending on who you want to believe, this may have only been the beginning of global financial turmoil influencing investment portfolios, as China is looking to create a new global currency in the near future.
As you would come to expect, banks and other traditional financial businesses remain optimistic and see a potential rally of the SP500 by the end of the year. The Deutsche bank seems to be especially optimistic, calling for an 8% rally by New Year’s Eve. Meanwhile, most other banks lowered their projected targets for the year.
Regardless of how investors want to look at it, the biggest threat to Wall Street comes from China. While everyone knows China is one of the largest financial powerhouses in the world today, their [alleged?] financial troubles will have a long-lasting effect on the world’s economy. Should push come to shove, China can put the entire world in recession once again, even though the previous recession wave is not over yet.
Last but not least, there is the ongoing debate on whether or not stock prices are overpriced, or overly cheap. Valuing a certain stock is not easy, and as we have seen in the past, a new stock can grow tenfold in price quite easily. Market manipulation seems to be at play during these events, but it’s also a great opportunity for investors to make a lot of money — if they play their cards right.
Traditional Investments Lose Appeal, Bitcoin Startups are the Next Big Thing
One thing most financial experts seem to overlook is the fact that many people on Wall Street are eyeing Bitcoin startups and the evolution of blockchain technology. Diversifying an investment portfolio is more important than ever in this day and age, and Bitcoin startups present an excellent opportunity to do so.
Granted, there are no guaranteed returns in the investment world, not even where Bitcoin companies are concerned. However, the Bitcoin ecosystem is still in its early days, and the underlying blockchain technology offers unlimited potential to revolutionize everyday life.
Furthermore, the Bitcoin investment sphere is not directly affected by traditional stock markets. The only shift that may occur is when more stock market traders flock to the Bitcoin ecosystem to diversify their portfolios. That change is already happening, and it will be interesting to see if this trend continues over the next few years.
Do you have any thoughts or insights about the stock market you would like to share with us? Let us know in the comments below!
Source: CNN Money
Images courtesy of SP500, Shutterstock