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!FLASHBACK: Economists: 13% Chance of a Stock Market Crash in 2005

Economists: 13% Chance of a Stock Market Crash in 2005
By Regina Whitmer, BestWire Services, Investing-News.Com
Dec 12, 2004, 17:01

The likelihood of a 2005 stock market crash is about 13% for the United States and Europe, and the outlook for economic growth for both regions has declined, according to a recent survey by Swiss Re.

The 45 economists who participated in the eighth survey said there is a 49% probability of U.S. growth exceeding 3% next year, down from 72% who believed that in an April survey. The outlook for European growth is better, with respondents saying there's a 33% probability of growth being above 2% in 2005, compared with 19% who thought so in April.

Inflation risks are minor, with respondents thinking there's a 7% chance the U.S. economy will experience an average consumer price index inflation of 4.5% or more for the next three years, and a 3% likelihood Europe will see the same.

The stock market prediction is significant, given the S&P 500 index has only once, in 1974, fallen by more than 25%, and the German DAX stock market index has fallen by more than 25% in four years. Other survey highlights:

-- The likelihood of stock prices declining in 2004 and not recovering to 2003 year-end levels until after 2013 is around 4% for the U.S. and Europe, reflecting no real change compared with the last survey.

-- The probability of inflation of more than 3.5% in the United States was estimated to be 10%, compared to 14% in the previous survey. There is a 7% chance Europe will experience inflation in excess of 3.5%.

-- There is a 9% chance U.S. inflation will be below 1% for the short term, and a 10% chance that will happen in Europe.

-- There is a 3% rate of risk of falling prices over the next five years in the United States and Europe.

-- The risk of two years of negative growth in a row increased in the United States from 3% to 4% and in Europe from 5% to 6%. The risk of five years of negative growth is about 2% in both regions, which is unchanged from the previous survey.

-- The likelihood of the U.S. dollar declining by 60% against the Euro over three years is 10%, up from 9%, while the estimated probability of the Euro losing 60% of its value in comparison to the U.S. dollar is 4%, down from 5%.
Economists: 13% Chance of a Stock Market Crash in 2005
By Regina Whitmer, BestWire Services, Investing-News.Com
Dec 12, 2004, 17:01
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Stock Picker RT
The likelihood of a 2005 stock market crash is about 13% for the United States and Europe, and the outlook for economic growth for both regions has declined, according to a recent survey by Swiss Re.

The 45 economists who participated in the eighth survey said there is a 49% probability of U.S. growth exceeding 3% next year, down from 72% who believed that in an April survey. The outlook for European growth is better, with respondents saying there's a 33% probability of growth being above 2% in 2005, compared with 19% who thought so in April.

Inflation risks are minor, with respondents thinking there's a 7% chance the U.S. economy will experience an average consumer price index inflation of 4.5% or more for the next three years, and a 3% likelihood Europe will see the same.

The stock market prediction is significant, given the S&P 500 index has only once, in 1974, fallen by more than 25%, and the German DAX stock market index has fallen by more than 25% in four years. Other survey highlights:

-- The likelihood of stock prices declining in 2004 and not recovering to 2003 year-end levels until after 2013 is around 4% for the U.S. and Europe, reflecting no real change compared with the last survey.

-- The probability of inflation of more than 3.5% in the United States was estimated to be 10%, compared to 14% in the previous survey. There is a 7% chance Europe will experience inflation in excess of 3.5%.

-- There is a 9% chance U.S. inflation will be below 1% for the short term, and a 10% chance that will happen in Europe.

-- There is a 3% rate of risk of falling prices over the next five years in the United States and Europe.

-- The risk of two years of negative growth in a row increased in the United States from 3% to 4% and in Europe from 5% to 6%. The risk of five years of negative growth is about 2% in both regions, which is unchanged from the previous survey.

-- The likelihood of the U.S. dollar declining by 60% against the Euro over three years is 10%, up from 9%, while the estimated probability of the Euro losing 60% of its value in comparison to the U.S. dollar is 4%, down from 5%.


Swiss Re conducts bi-annual surveys of about 50 economists from the United States and Europe, focusing on the probability of economic performance substantially deviating from the general economic consensus.

Swiss Re is one of the world's leading reinsurers and the world's largest life and health reinsurer. Reinsurance is a technique sometimes used as a loss-mitigation tool to reduce volatility on balance sheets.


LINK: http://www.investing-news.com/artman/publish/article_118.shtml