by Ben Moshinsky
UBS thinks the risk of a stock market crash is growing.
The era of cheap debt and plentiful liquidity is slowly drawing to an end, according to a team of UBS analysts led by Paul Winter, making it harder to use credit to juice corporate profits.
As earnings fall, so will investors’ confidence in stocks, leading to either a market crash or a correction, which is a slower and less violent drop in stock prices.
UBS notes that “77% of stock crashes are driven by earnings announcements (Ak et al 2016),” and more companies are likely to disappoint the market in the future.