The truth behind the stock market slump

The recent slump in global stock markets wasn't caused by fear of inflation, says Martin Spring in On Target. The real reason for the fall was Japan's decision to slash monetary growth ahead of raising interest rates - which means there could be more squalls to come...

The hurricane that swept across share and commodity markets last month wasn't triggered by investor fears over inflation, economic growth or corporate earnings the reasons generally given in the financial media but by a blow to global speculators delivered in Japan.

  • If coming inflation were the problem, it wouldn't make sense to sell gold (one of the hardest-hit assets) or to stay in bonds (one of the least-affected).
  • If economic growth were the problem, central banks wouldn't be united in an interest-rate-raising strategy.
  • If the corporate earnings outlook were the problem, analysts' profit forecasts would be starting to signal it.

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