Moneycontrol
Last Updated : Sep 16, 2018 09:44 AM IST | Source: Moneycontrol.com

Next financial crisis in the US could occur in 2020: JPMorgan

While the duration of the next recession is unknown, the financial services firm has said it could see a US stock slide by about 20 percent.

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The next financial crisis in the US might happen in 2020, JPMorgan Chase & Co has said, according to a report by BloombergQuint.

While the next crisis might be less severe than the previous crisis, lower liquidity in the financial market could worsen the situation, the report cites JPMorgan as saying.

The last financial crisis took place ten years ago after Lehman Brothers filed for bankruptcy protection on September 15, 2008.

Also read: The collapse of Lehman Brothers, the fallout and the lessons from the financial crisis

While the duration of the next recession is unknown, the financial services firm has said the recession could see a US stock slide by about 20 percent.

Emerging-markets stocks might slide 48 percent, and emerging-markets currencies could take a 14.4 percent hit, JPMorgan said.

“Across assets, these projections look tame relative to what the GFC delivered and probably unalarming relative to the recession/crisis averages” of the past, JPMorgan strategists John Normand and Federico Manicardi wrote in the note, according to the report.

JPMorgan's model has made these predictions based on several factors -- the length of the economic expansion, the potential duration of the next recession, the degree of leverage, asset-price valuations and the level of deregulation and financial innovation before the crisis.

A separate note from JPMorgan says there has been a movement from active asset management to passive asset management, the report adds.

This change has "eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption," Joyce Chang and Jan Loeys said in the note.

A positive mentioned by Normand and Manicardi is that since assets in emerging markets have become cheaper, it could cushion declines from stock market peaks.
First Published on Sep 16, 2018 09:44 am
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