Are Stocks Getting Ready To Sell-off?
Stocks have finally seen their seemingly never ending ascent come to a halt. While the markets have recovered much of their lost ground in recent weeks, the path of least resistance may remain lower as long as the Fed is still raising interest rates. If that is the case, stock investors may have a tough year ahead of them as the Fed will almost certainly continue raising rates in 2023.
More and more experts now appear to be questioning the equity market’s resolve at this point. Among the naysayers is Gloom, Boom, and Doom author Marc Faber. Mr. Faber believes that we will see a 20-30 percent drop in stocks from current levels. Mr. Faber has been looking for a sizable pullback in stocks since 2012. Although he acknowledges his forecast has not yet played out, he still holds firm in his beliefs. Mr. Faber says that we have seen a significant drop in emerging economies and that the fact that fewer stocks have been making new highs while the market grinds higher is a cause for concern. Faber also points to the consumer, and some key consumer-driven equities. He stated “Wal-Mart shares peaked out in February and since then; the stock has been moving sideways. As an economic indicator, Wal-Mart is a very good say symptom of what is happening to the consumer and if their sales are flat or down, or Coca Cola’s in the U.S., it tells you something about the consumer.”
Faber also says that when he travels, he does not see global economies that are expanding. In fact, he says that although the Asian economy is not in recession per se, it does appear to have slowed significantly or it is seeing no growth at all. Faber also went on to discuss the Fed and its monetary policy. Faber stated “This is a very mature economic recovery…It would seem to me that the monetary policies that the central banks pursue are negative for economic growth, but they are positive for asset price increases. As a result of asset price increases, lots of goods have become unaffordable for the typical household.” The bottom line, according to Faber, is that people think the Fed will just continue to print money and boost asset prices in the process. When everyone is thinking the same, he says, people are not thinking clearly.
Considering that more and more experts seem to be growing weary of stocks, perhaps now is the time to look at diversifying.
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