Is Europe the biggest factor influencing a potential US market collapse?

The Euro Zone debt crisis has been on the radar of most analysts as the main cause of a negative turn in the US financial markets. European banks are running out of cash, they are in a bad position because they lent too much money to Greece, Spain and Italy at historically low rates.

Cody Willard of Market Watch writes an interesting piece on why investors should be looking closer to home rather than across the pond.

“My biggest worry has nothing to do with Greece or Spain or the eventual collapse of the Euro as a fully-functioning, inter-state currency. Rather, as I’ve many times explained — the markets are all DOWN since the EU and Euro came into existence in the late 1990s. The bull market and the US economy had boomed for 25 years before the EU/Euro came to be.

But the thing that will likely crash the stock markets next is when the US Treasury interest rates start to return to something more normal and reflective of the true cost of capital, which has never been and never will be less than 1% for an extended period of time. There is risk to lending people and nation’s money and that risk must be compensated at a reasonable rate….and eventually lenders to the US government will expect reasonable compensation.”

Many decades of falling rates

Past performance is not necessarily indicative of future results.

Read more from Cody Willard at MarketWatch: The catalyst for the next market crash

Where do you see interest rates heading and what kind of impact will it have on our economy in the States? Let us know what you think.

Email us at  iinvest@chesapeakeinvestment.com.

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Chesapeake Investment Services
Managed Futures Specialists

Past performance is not necessarily indicative of future results. The risk of loss exists in futures trading.