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Why Are Investors Pulling Money Out Of Global Stock Funds At The Fastest Pace Since The Last Financial Crisis?

Michael Snyder
July 2nd, 2018
The Economic Collapse
Comments (14)
Read by 2,287 people

This report was originally published by Michael Snyder at The Economic Collapse

We haven’t seen anything like this since the financial crisis of 2008. Investors are taking money out of global stock funds at a pace that we haven’t seen in 10 years, and many believe that this is a harbinger of tough times ahead. Global stocks lost about 10 trillion dollars in value during the first half of 2018, and an even worse performance during the second half of the year will almost certainly push the global financial system into panic mode. U.S. stocks have been relatively stable, and so most Americans are not too alarmed about what is happening just yet. But if you look back throughout history, emerging market chaos is often an early warning signal that a major global crisis is on the horizon, and that is precisely what is happening right now. Financial markets in emerging markets all over the planet are in the process of melting down, and the losses are becoming quite dramatic.

As stock prices around the planet start to plummet, investors are pulling money out of global stock funds very, very rapidly.  The following comes from CNBC

Investor money is hemorrhaging out of global stock funds at a pace not seen since just after the financial crisis exploded.

Global equity funds have seen outflows of $12.4 billion in June, a level not seen since October 2008, according to market research firm TrimTabs. Lehman Brothers collapsed in September of that year, triggering the worst economic downturn since the Great Depression and helping fuel a bear market that would see major indexes lose more than 60 percent of their value.

Does this automatically mean that another major financial crisis is on the way in the United States?

No, but it is definitely not a good sign.

As CNBC also noted, investors have been taking tremendous amounts of money out of one emerging market ETF in particular…

The iShares emerging market ETF has seen $5.4 billion in outflows in June, the most of any fund, according to ETF.com.

“U.S. dollar strength and persistent underperformance seem to be driving fund investors away from non-U.S. equities,” TrimTabs said in a note.

The list of emerging market economies that are in crisis mode is beginning to get really long. Argentina, Venezuela, Turkey, Brazil and South Africa are some of the more prominent examples.

If the chaos in emerging markets continues to intensify, the rush for the exits is going to become a stampede. Not too long ago, I discussed the fact that the “smart money” was getting out of stocks at a pace that we haven’t seen since just before the last financial crisis, and it isn’t going to take too much to set off a full-blown financial avalanche.

In the general population, most people still seem to think that the financial system is in good shape. But in many ways, the first half of 2018 was the worst half of a year for the global financial system since the financial crisis of 2008. The following summary of the carnage that we have witnessed over the last 6 months comes from Zero Hedge

  • Bitcoin Worst Start To A Year Ever
  • German Banks At Lowest Since 1988
  • Onshore Yuan Worst Quarter Since 1994
  • Argentine Peso Worst Start To A Year Since 2002
  • US Financial Conditions Tightened The Most To Start A Year Since 2002
  • Global Systemically Important Banks Worst Start To A Year Since 2008
  • Global Stocks Worst Start To A Year Since 2010
  • China Stocks Worst Start To A Year Since 2010
  • German Stocks Worst Start (In USD Terms) Since 2010
  • Global Economic Data Disappointments Worst Since 2012
  • Emerging Markets, Gold, Silver Worst Start To A Year Since 2013
  • High Yield Bonds Worst Start To A Year Since 2013
  • Offshore Yuan Worst Month Since Aug 2015
  • Global Bonds Worst Start To A Year Since 2015
  • Treasury Yield Curve Down Record 16 Of Last 18 Quarters

And as I mentioned above, global stocks lost about 10 trillion dollars in value over the last 6 months.

When the Federal Reserve hikes interest rates, it puts a lot of financial stress on emerging markets.  It becomes much more expensive to take out dollar-denominated loans, and it also becomes much more expensive to pay back existing dollar-denominated debts.

But the Fed has not listened to appeals from the rest of the world, and has decided to accelerate the pace of rate hikes instead.

Meanwhile, the trade wars that the United States has started with other nations continue to escalate. Here are the latest developments

U.S. farmers and food producers are in the cross-hairs of a global trade conflict that shows no signs of abating anytime soon — and things are about to escalate in a big way on Sunday.

New tariffs will be imposed by Canada on beef, and more retaliation will come this week when China and Mexico take aim at pork. China’s also planning a 25 percent tariff on soybeans on July 6 in addition to hikes on pork duties, and Mexico’s 20 percent levy on “the other white meat” is set to begin July 5.

Meanwhile, the European Union’s initial duties worth $3.2 billion took effect June 22. Most of the duties amount to 25 percent, and include a variety of U.S. products, including motorcycles, boats, whiskey and peanut butter.

If nobody gives in, economic activity will start to slow down substantially. This is what CNN says that we should expect…

Here’s how the dominoes could fall: First, businesses would be hit with higher costs triggered by tariffs. Then, companies won’t be able to figure out how to get the materials they need. Eventually, confidence among executives and households would drop. Businesses would respond by drastically scaling back spending.

A perfect storm is starting to emerge, and investors are getting spooked.

If financial problems continue to get worse in emerging markets, and if the Federal Reserve continues to raise interest rates, and if these trade wars continue to grow, it is only a matter of time before we have a major market catastrophe in the United States.

The storm clouds on the horizon have just kept getting darker and darker, and many analysts all over the nation agree that this is the gloomiest that things have looked since 2008.

Hopefully a way can be found to turn things around, but I wouldn’t count on it…

***

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

GetPreparedNow-MichaelSnyderBarbaraFixMichael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream

If you want to know what is coming and what you can do to prepare, read his latest book Get Prepared Now!: Why A Great Crisis Is Coming.

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Author: Michael Snyder
Views: Read by 2,287 people
Date: July 2nd, 2018
Website: http://theeconomiccollapseblog.com/

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14 Comments...

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  1. So that means the FUSA has had one for a bit. Cause we know china steals everything…

    • TharSheBlows says:

      Who cares, Wallstreet is a Ponsi scheme, and only about 10% of Americans invest in that or any other financial funds. Middle America has had its pocket picked clean for decades. Let them fry!!

    • durangokidd says:

      Why are investors moving to CASH (read KING DOLLAR) ???

      Because China is about to implode and chaos is about to ensue under the Trump Trade War which will crush the Chinese very leveraged economy and their even more leveraged corporations.

      Payback for violating the AGREEMENT between the two nations in the early ’90’s will be a glorious thing to behold. When the smoke clears, the Yuan will be on par with the ruble for value and China will spend itself into an even bigger hole to acquire natural resources for its export machine.

      TRUMP TARIFFS will put the cost of Chinese products on par with American Made Products and the profits from those tariffs will pay down US DEBT.

      I love it when a PLAN comes together !!! 🙂

  2. This is a prepping site. So, an add for Snyder’s prepping book isn’t too far off. It does explain why Snyder is always pessimistic. There doesen’t have to be a financial collapse, civil war, pandemic that kills the cattle; but it sure puts a fire under your ass to imagine one or all.

    _

  3. rellik says:

    I was a business major for a while(I switched to a STEM degree) and the most outstanding thing I learned from that side trip, was stick to the fundamentals.
    People do certain things to survive and prosper. Invest in those “things” and you will always survive.
    Markets are like gambling in Las Vegas, the house always wins as they run the game. Be it PM prices, Equities, and to some extent Bonds, the guys running the markets always win.
    Assets are always better than paper or metal, but they have the drawback is they are not as fungible as you would like.
    I’d rather own Hilo harbor than have all Of Facebook’s and Microsoft’s stock, but it would be hard to sell Hilo harbor.

  4. Johhny says:

    I’m dumping money in at a high rate! It’s going to go MUCH MUCH Higher!!

  5. Harbard says:

    Well I’m well prepped for the economic collapse. But always looking for more “goods”. Last weekend I had company from out of town, and I had some cool antiques on display in my family room.

    One of the guests took a liking to a military item and asked me what I thought it was worth, I said in todays dollars well over a thousand. He thought about it and asked if I’d sell it on the spot for a grand, of course he took it home with him.

    Today I thought about how to invest my new windfall. I went to Sportsmans Guide and looked up gas masks, they usually have a half dozen or more, but they had only one and it was suspect. I guess everyone on the big Island has already bought them all to protect from the volcanic gas and so on.

    Okay, maybe buy some silver eagles, and then I thought, 5 of these things will guy 40 cans of Spam, or a 100 watt solar panel. Or???

    I’m leaning for the solar panel, a couple of storage batteries, and the Spam. I’ll keep the 500 dollars and change for a week or so.

    If I buy any stocks, they will be hardwood or polymer with some metal attachments…

    • rellik says:

      H,
      I’m on the
      Big Island of Hawaii.
      I don’t have any Gas masks, nor do I need them.
      The Volcano is really impressive with its power
      and destruction, but it is very localized.
      Many people have lost their homes and many
      more will not be able to build on their land in
      the future.
      We only have about 200,000 people here, and about
      2,000 have been displaced.
      You mainland guys would laugh at those numbers.
      BTW I have at least 40 cans of Spam, 44 solar panels(240 W),
      and lots of other “stuff”
      Enjoy living on your preps.

      • durangokidd says:

        Love all those solar panels. Everyone should invest in as much solar energy equipment they can afford.

        Spam??

        It’s hard for me to get past the jelly. I’m loaded with canned chicken, tuna, and jerky. Lots of beef stew too !!! 🙂

  6. EU threatens $300 billion tariffs against U.S. after fresh trade salvo from Trump: report

  7. Paul revere says:

    Stock market added 6.9 trillion, jobless claims lowest in history, big buisness coming back at historical rates.. stfu with your doom and gloom bs

  8. NunyaBidness says:

    “during the first half of 2018, and an even worse performance during the second half of the year will almost certainly push the global financial system into panic mode.”

    The imbecile left won’t get their magnificent abilities to think beyond, “A republican is President, republicans are collapsing the economy”

  9. 2018 Is Now says:

    Liquidity.

 

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