Picturing Threats To The US Stock Market & Economy

An illustrated guide to things that should make you uneasy.

 

1) US stocks are very expensive, and dominated by a few names, threatening a crash ahead.

 

2) Earnings growth won’t save the market. If P/Es contract below the current 30, stocks could lose more than 60%.

 

 

3) Fear and Greed are tugging against each other, leading to 2 distinctly different strategies. Which are you taking?

 

4) Precious metals thrive, triggered by inflation fear at first, then fanned by greed jumping on.

 

5) Plenty of room to lower interest rates in order to stimulate the economy. But see next point.

 

6) Does the economy need stimulation or moderation? Each loop around is more dangerous, ballooning the debt.

7) Baby boomers in target date funds are not protected against the next crash. They’re far riskier than theory.

 

 

Conclusion

I have been warning my readers for a long time, earning me a reputation as a permabear. You can judge if my concerns are warranted. If you decide to act, it’s worth noting the two distinct strategies that are currently in play. Many have moved beyond US stocks to precious metals and foreign stocks. Momentum might continue this year in these asset classes. On the other hand, Warren Buffett has moved in the opposite direction to the safety of cash. In other words, risk-on and risk-off are both in play. Baby boomers should choose risk-off at this time in their lives because they are in the Retirement Risk Zone when Sequence of Return Risk can ruin the rest of life. They might choose risk-on when they’re beyond the Risk Zone, 5 years into retirement. Younger people didn’t feel the crash of 2008, so they don’t know what risk is. Risk-on is a likely choice for them, and they can afford this choice because their horizon is long.

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More By This Author:

Baby Boomers In Target Date Funds Are Not Safe, But Think They Are
Theory Versus Practice In Target Date Funds And Lifepaths
Peer Into The 2026 Market Forecast Crystal Ball