Because of this, there is a divide between the real economy and the financial economy caused either due to irrational exuberance of the market participants or due to herd mentality or any other similar reason. In fact, there is one key metric I can share with you that pretty clearly points out when the bull party will be over and the bear will come out of hibernation. Stock Market Bubble is the phenomenon where the prices of the stock of the companies do not reflect the fundamental position of the company. So we will talk about the strategies to ride this bubble higher and prepare to parachute out before it explodes. However, there is good reason to believe there is another 12-24 months of further price upside to go before the bubble bursts. Yes, I know that many are reading this article and assume that an existing bubble means to run for the hills now. This includes historical perspective on how military conflicts actually turn out to be bullish for the stock market even after the initial fear that sparks a sell off. Next we talk about the recent detour from the bubble brought on by the Russia/Ukraine crisis. In fact, most of these measures are even worse than experienced during the last valuation bubble in 1999 leading to the bear market that began in 2000. I start by reviewing 5 classic valuation metrics which show, beyond a shadow of a doubt, we are very much in bubble territory. If a stock market crash like the one David Rosenberg envisions is coming, it’s clear that Dow bulls will be caught on the wrong side of an extremely crowded long trade.Just a few more details on the presentation. In their view, equities are appropriately priced based on near-zero interest rates. On the other end of the spectrum, bullish analysts simply shrug their shoulders and say what happens on Main Street is irrelevant to what happens on Wall Street. presidential election, this bull run has polarized economists.īears like Rosenberg struggle to reckon the economic plight seen in working-class households with buoyant asset prices. Momentum trades are amplified by the market making of option traders and their concentration in a few growth stocks. Sebastian Galy at Nordea Asset Management explained why in a comment shared with CCN.com:Īs a consequence, bearish bets on top growth stocks have reached an all-time low. Ironically, although it’s the bulls that sparked the mega-cap rally, it’s the former bears who are sustaining it. Watch a recent clip of his “Davey Day Trader Global” web show below: | Source: David Rosenberg via Twitterįueling the caution of bears like Rosenberg is the inexplicable success of novice investors like Dave Portnoy, who has embodied the FOMO with his “stocks always go up” mantra. Rosenberg has been cautious about the state of the stock market for some time. Rosenberg has long been bearish on equities, but he claims the present behavior in financial markets is bordering on the comical. When this mega-bubble pops, it will be spectacular. Remember what Herb Stein had to say about things lasting forever. Watching the market these days is like watching a clown blowing up a balloon (or Chuck Prince dancing in the ballroom) knowing the inevitable. He continues to ridicule the moves seen on Wall Street, and he predicted this week that an incredible crash is on the horizon: There’s no comparison to AAPL’s run-up to a $2 trillion market cap, though Tesla’s incredible momentum ranks as an extremely close second.ĭavid Rosenberg, chief strategist at Rosenberg Research and formerly the top North American economist at Merrill Lynch, doesn’t buy that stocks can justify record highs while the economy is in the tank. The poster child for the bull market has to be the world’s most valuable stock: Apple. The Dow Jones has risen from the ashes of a major crash in 2020. Steadily rising equity prices rubbed salt in the wound over the ensuing months, with both the S&P 500 and Nasdaq eclipsing the already frothy heights they achieved in early 2020. They finally got the stock market crash they were looking for, only to have it whisked away before their eyes. There’s no question it has been a tough year to be one of the bears. David Rosenberg: Brace for a ‘Spectacular’ Stock Market Crash There aren’t many left, but the few who remain can barely believe their eyes as the Dow marches toward a new all-time high. Economist David Rosenberg warns this is a “mega-bubble” – and the pop is going to be “spectacular.”Īs the stock market continues to wind its way higher, Wall Street’s permabear herd is growing thinner and thinner.Concentrated bets on a handful of titanic companies have the major U.S.The stock market is at record highs, even though the U.S.
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