Most of the financial experts are concerned that the Federal Reserve Bank is busting and increasing the asset since the time of the Federal Chairman Alan Greenspan. However, collapse in the financial market may not be observed now. Few reasons can be found behind the declaration that the stock market won’t crash.
- Inflation of asset prices may not be in a bubble
Properties related to the housing have become affordable in the recent time. It has been observed mainly due to decrease in the amount of housing prices in addition to mortgage rates. Value of home ownership has been brought back to its normal place. Market for the household is improving as a result. However, both the parents and their children are living the same house. In some occasion, house is given on the rent as well.
In case of stocks, high amount of profit margin can be observed. Therefore, an illusion has been created that the market is affordable. If the margin of the stock comes close to average long term price then earning growth can be decreased. Through alternative measures of stock valuation, it has been proved that stock is cheaper.
- Economy has been growing at 2.5%
Due to weakness in the financial market in United States of America, it may not be lead to recession this time. Slow growth can be observed than calculation has been observed in China along with United States of America. Through the trade with the US and China, GDP has been improved very nominally. Therefore, consumers are investing 70% of their GDP in the market. Therefore, an effect has been noticed on the economic growth of the market.
- Proper regulation of banking system in comparison to previous years of financial crisis
Bank has avoided the technique to improve the balance sheet with risk based investments. Methods of borrowing money may not be observed in the given system. It is especially true with the deposits. Percentages of losing credits have been decreased. Liquidity has been observed in the different locations of federal system. Therefore, crisis related to risk of liquidity has eliminated. According to the opportunities, bank can take adequate measures. It can be observed as one of the advantages of developed market.
- Debt requirement has reduced
Following to the Great Recession, issues of debt allotment has been handled by the Federal Reserve Bank strictly. Problems can be observed with the too much of debt. Therefore, more measures have been taken to restrict the situation. However, there is some encouragement to take credit from the bank.
Due to stress and tension with the credit, people have been avoiding the credit in most occasions. Therefore, encouragement may not be resulted in positive answer.
Some benefits can be observed especially with the prices of gas and energy. However, profit with the gas prices is not transforming in to more expenditure. Consumer has obtained an ability to repay the debt easily. Increase in the amount of retirement savings can be observed quite naturally. Previously, limited amount of retirement saving has been observed as a problem in the U.S financial market.