Are You Prepared for Widespread Bank Failures?

By Elliott Wave International

The ideal time to prepare for most anything in life, especially a potential circumstance that’s adverse, is before it happens.

The problem is: Many people don’t know what will happen in their lives ahead of time.

However, sometimes warnings are provided yet they’re ignored or not taken seriously. A current warning from Elliott Wave International which people are urged to take very seriously is that the economic slowdown could morph into something far worse than a garden-variety recession.

Here’s what Robert Prechter’s Last Chance to Conquer the Crash has to say:

In 2008-2009, some U.S. banks came under pressure of insolvency, just as the first edition of Conquer the Crash predicted. Fed bailouts kept most of them open. In the next depression, bank runs and mass closings are far more probable.

Indeed, a troubling sign for the banking industry has already started to develop.

Here’s an Oct. 3 headline (Business Insider):

Credit Suisse is fending off concerns about its financial health, fanning fears of another Lehman Brothers moment that could roil the global financial system. …

The next day (Oct. 4), Barron’s had the straightforward headline:

Credit Suisse Is In Deep Trouble.

In a nutshell, the Swiss banking giant plans a massive restructuring, and executives recently had to reassure major clients and investors about the bank’s liquidity.

Concerns about the financial health of Credit Suisse doesn’t mean that a systemic banking crisis will start tomorrow or next week. However, it may be a good idea to check out the financial health of the bank or banks with which you do business, especially considering the broad backdrop — as represented by these headlines:

  • Global Manufacturing Index Contracts for First Time Since 2020 (Bloomberg, Oct. 3)
  • IMF presents ‘darkening outlook’ for global economy (UPI News, Oct. 6)

Days before that global economy headline published, the October Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, showed this chart and said:

This chart of Global Real Economic Activity … shows that the world economy is heading into an extraordinary period of economic contraction. The trendline points out a long-term divergence from the last peak, in May 2008, which followed the Dow Industrials’ October 2007 top by eight months. The latest peak in the index came in October 2021. … This time, the world economy appears to be on much shakier footing.

Now is the time to prepare for what may be just around the corner.

One way to prepare is to get a handle on the stock market’s trend because the stock market tends to lead the economy.

The Elliott wave model can help you analyze the stock market.

If you’re unfamiliar with the Elliott wave model or need a refresher, the definitive text on the subject is Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote:

All waves may be categorized by relative size, or degree. The degree of a wave is determined by its size and position relative to component, adjacent and encompassing waves. Elliott named nine degrees of waves, from the smallest discernible on an hourly chart to the largest wave he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. The specific terminology is not critical to the identification of degrees, although out of habit, today’s practitioners have become comfortable with Elliott’s nomenclature.

If you’d like to read the entire online version of this Wall Street classic, you may do so for free once you join Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is also free and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading.

Just follow this link to get started: Elliott Wave Principle: Key to Market Behavior — free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Are You Prepared for Widespread Bank Failures?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.