Professionals at investment bank JPMorgan say the next global economic crisis will start in 2020.
Experts say the recession due to occur in two years will be less impactful than the 2008 crash, which sent the globe into recession and has been named the worst recession ever.
The bank says U.S. shares could plummet by 20 percent, far less than the 54 percent drop in the S&P 500 index ten years ago after the collapse of Lehman Brothers 10 years ago last week.
Significant drops would be seen in energy costs, the price of base metals and shares in developing markets, such as China, Russia, Brazil, and India.
JPMorgan administrators Federico Manicardi and John Normand described this situation as “probably unalarming” compared to the average of former disasters.
Their examination is based on a model that considers the length of the economic expansion, the likely duration of the ensuing recession, the level of support, asset-price estimates and the degree of deregulation and financial reform ahead of the crash.
Another JPMorgan analyst, Marko Kolanovic, predicts that the next economic crisis could be started by “flash crashes” – unexpected stock sell-offs by computerized trading systems.
“Basically, right now, you have large groups of investors who are purely mechanical,” Kolanovic said. “They sell on certain signals and not necessarily on fundamental developments. Meaning if the market goes down two percent, then they need to sell.”
This “great liquidity crisis”, as described by Kolanovic, would need central banks to avert a spiral into a financial depression.
“The next crisis is also likely to result in social tensions similar to those witnessed 50 years ago in 1968,” added Kolanovic.
The newest recession prediction comes as Mark Carney, the governor of the Bank of England, advised that a no-deal Brexit might lead to an economic crisis as damaging as the 2008 crash. Great Britain is set to withdraw from the European Union in March of 2019.
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