Stock market correction: Wall Street veteran warns of 10%-15% drop

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Wall Street veteran Peter Kraus breaks down why investors should expect about a 10% to 15% market correction ahead — and shares his thoughts on the GameStop drama, SPAC mania, and bitcoin craze.

"They weren't locked into a particular set of factors because we didn't compensate them for being exposed to a set of factors," he said."They said we will try to outperform, and the compensation system is aligned with that."Kraus does not expect his firm to repeat this level of outperformance in 2021 and it has a lot to do with the frothy market conditions today. and increases in real interest rates.

"Those discount rates will go up," he said,"and as a result of that, those stocks will get more expensive and investors will probably adjust." "As an investor, you have to be conscious of that," Kraus said."I couldn't be surprised and no one should be surprised if in a market that's going up as fast as it has that there was a 15% or 10% pullback."Bubbles do not exist in a vacuum and Kraus is seeing indications of bubbles everywhere he looks these days.

"We could see the retail involvement in GameStop and the incredibly fast-moving price of GameStop," he said."But we didn't see all the buyers of GameStop, we didn't see all the sellers of GameStop."

 

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