Tuesday, May 30, 2017

Hedge fund manager is calling for US stock market crash

Business Insider:

I’m telling you right now, the US is going to have a crash and it will be massive,” asserted Mark Yusko at Mauldin Economics’ Strategic Investment Conference.


He believes that efforts to generate growth through fiscal stimulus and tax cuts will prove futile because the working-age population in the US is declining. As such, consumption—which makes up 70% of the US—will continue to fall.

Mark thinks instead of taking off, the US economy is on the cusp of a recession.


Since 2012, the earnings of S&P 500 companies have gone nowhere, yet the market is up 70%. This rise has all been multiple expansions. As such, US equities are one of the most expensive class of assets in the world today.

With the S&P 500 trading at record highs, top investment management firm GMO projects returns will be negative over the next seven years.

The US stock market is at one the most overvalued places it has ever been. The CAPE ratio says that returns over the next ten years will be slightly positive maybe 2% per year. There is also a risk of a big drawdown in the market during that time .

I think it makes sense for investors to lighten up on US stocks and consider much cheaper stock markets around the world.

The CAPE ratio is not a market timing tool. The overvalued US stock market could go much higher. Nevertheless it makes sense for the average person to take heed. How many of us are such great market timers that we will know when the exact top is in?

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