George Soros is seeing shades of 2008 in the current market environment, but do other investment and economic heavyweights agree that it is time to sound the alarms? It's a mixed bag.
The Hungarian-born billionaire investor warned at an economic forum in Sri Lanka on Thursday reported by Bloomberg that global markets are facing a "crisis." He advised investors to exercise caution in the face of turmoil in China, which is struggling to find a new growth model and whose currency devaluation is transferring problems to the rest of the world. The country suffered a market meltdown this week, and trading has already been halted twice.
"China has a major adjustment problem," he said. "I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008."
He said that a return to positive interest rates is a challenge to the developing world as well.
Soros isn't alone in expressing concerns about the direction the markets are headed.
The World Bank issued a report on Wednesday warning about the impacts of weak growth among emerging markets on the global economy. The report calls financial turmoil, combined with weakness in the BRICS economies -- Brazil, Russia, India, China and South Africa -- the "perfect storm" and cautions of spillovers worldwide.
"Stronger growth in advanced markets will only partially offset the risks of continued weakness in major emerging markets," said Ayhan Kose, director of the World Bank Development Economic Prospects Group, in a statement. "In addition, the risk of financial turmoil in a new era of higher borrowing costs remains."
In September, Carl Icahn released a video titled "Danger Ahead" outlining a bearish view of what's to come. "I've seen this before a number of times," he said in reference to past financial crises. "And I think a time is coming that might make some of those times look pretty good."
The billionaire activist investor faulted the Fed for its role in providing cheap money, thus creating an earnings mirage and inflating asset prices. He also said that earnings growth is not sustainable and invoked 2008. "You don't know how bad the end of this is going to be. You do know, though, that when you did it a few years ago, it caused a catastrophe. It caused '08," he said.
Richard Fisher, former president and CEO of the Federal Reserve Bank of Dallas, also pointed to the Fed as a culprit in the current market sell-off in a CNBC op-ed Wednesday. He cited the Fed's "hyper-accommodative monetary policy" as one that frontloaded a market rally and cautioned of a "payback period" to come.
Others, however, have expressed cautious confidence in where the markets are headed.
Sam Stovall, managing director of U.S. Equity Strategy at S&P Capital IQ, said in a phone interview that from an economic and fundamental standpoint, the U.S. market appears sound, though price data is impossible to ignore.
From a fundamental perspective, economic growth is expected to be up 2.7% in the United States in 2016, and other factors -- housing starts, consumer spending, earnings forecasts and the yield curve -- don't suggest a bear market coming in the U.S. However, there are no guarantees.
"This is a global economy," Stovall said. "Like the analogy of a series of mountain climbers tethered to one another, even though you might have a firm grip, should other global economies slip and fall, they will drag us with them."
As to whether the current scenario is reminiscent of 2008, he is doubtful.
"In 2008, in many ways, we pretty much found out after the fact what was going on underneath the surface. It's not like we had in 2000 -- a sector that was trading at 65 times trailing earnings and thinking it was cheap. In 2007, yes we did have financials being grossly overweighted relative to other sectors in the [S&P] 500. We don't have that kind of exaggerated representation this time around," he said.
Leon Cooperman, head of Omega Advisors, told CNBC in December that while the Fed should have raised rates a year ago, his team didn't anticipate a recession in 2016.
"If we are right that there is no recession, I'd expect that 2016 is a year where market breadth catches up to averages," he said. However, he left the door open for turmoil.
Ethan Penner, managing partner of Mosaic Real Estate, who is widely credited as the creator of the commercial mortgage-backed securities market while at Nomura Securities in the 1990s, also expressed a mixed view of where the market is headed in an email to TheStreet. As for Soros' assessment, he agrees with the billionaire on some points but differs on others.
"There is a chance for a collapse in financial asset values like we witnessed in 2008, as there always is when asset values are at peak levels," he said. But 2016 is no 2008.
There is less financial system debt, private sector balance sheets are cleaner, personal mortgage indebtedness is lower, and most systemic debt now flows through the Fed as there are no longer meaningful financiers that operate independently, as was the case in 2008 with the now-defunct Lehman Brothers and Bear Stearns, he noted. He added that there is also a tremendous amount of capital on the sidelines ready to buy in dips.
On the Fence
Other market leaders are refraining from making calls on what's ahead.
"I try to avoid high frequency commenting" said one former International Monetary Fund chief economist said in an email. Another former IMF economist declined to comment.
Ed Conard, founding member of Bain Capital and author of the 2012 book Unintended Consequences, said in an email that the current scenario doesn't feel like a crisis, emphasizing that when the Fed finally musters enough confidence to raise short-term interest rates, historically the economy has performed well.
"That doesn't mean events in North Korea (which are coordinated with the Iranians) and Saudi Arabia shouldn't give us pause," he warned.