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Aruba, January 9, 2018 - Investors around the world felt tremors from gaping faults in the global economy. On Christmas Eve 2018, American stocks had their worst December performance since 1931 at the time of the Great Depression. The US stock market has thus entered bear territory, when stocks have fallen 20 percent or more from a recent high.

It seems the US stock market will gyrate with much volatility in the new year. According to Goldman Sachs and CNBC, it takes stocks an average of 22 months to recover from a bear market.
Joining the United States with the bears are the major bourses of Germany, China and Japan. And according to a CNN report, almost half of US chief financial officers surveyed fear a recession in 2019.
The immediate trigger is the new regime of rising interest rates. The Federal Reserve, or Fed or the US central bank, hiked the benchmark rates four times in 2018. That’s nine increases since December 2015. Two more are due in 2019.
The Fed’s intent is to prevent overheating of the US economy, and to normalize interest rates from the lows of the past years, for the Fed had set the rates near zero in response to the Great Recession of 2008-2009.
Add to that, yields on the 10-year Treasury bonds have risen to their highest levels in seven years. This is likely due to fears of inflation.
All these rate hikes will curb spending. Families will be less willing to borrow as higher rates hit auto loans and adjustable mortgages. Firms will be investing less, and interest payments will eat into their profit margins.
The stock market is volatile, too, as investors shift from stocks to bonds—the latter have become more attractive due to their higher yields.
The regime of higher interest rates will be burdensome for the global economy because of the mess in debt.
For the world as a whole, the total household, corporate and government debt is $247.2 trillion in the first quarter of 2018.