Game of Trades: Is a European 2008 About to Trigger a Stock Market Collapse?

US investors are cautiously optimistic as inflation is starting to show year-over-year declines. That indicates that the Federal Reserve is likely closer to changing its current policy of regularly raising interest rates.

While that’s good news, the US isn’t the only player in the global financial system. Europe has been struggling this year. And a potentially harsh energy shortage ahead could lead problems. And that could impact US stocks, given the significant trading relationships in play today.

While the US stock market has just bounced off of its 200-week moving average, European stocks have fared far worse.

German manufacturing has been a huge drag, in part due to its reliance on natural gas. Besides an energy crisis, an active warzone and even slower-growing economy overall point to trouble ahead.

Any slowdown in Europe would lead to a bigger hit for the US than a recession in China.

The Euro has already dropped to under par with the US dollar amid the current stress. The last time the Euro traded this low was in the year 2000.

And there’s been rising concern over systemic risk stemming from the problems in European markets. That could create a 2008-style meltdown for European markets.

So it’s clear that a big enough downturn in Europe could tip the US into a recession.

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