Stock market bulls are excited about the meeting between presidents Trump and Xi. Some are encouraged by the Dow Jones Industrial Average’s chart pointing to 32,000 points. However, prudent investors ought to be warned about a big flaw in bulls’ logic that nobody is talking about.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora. Big flaw Let us start out with Arora’s Second Law of Investing: “Nobody knows with certainty what is going to happen next.” Stock market bulls are painting a picture-perfect scenario. However, there is a big flaw in this scenario. The flaw is the stock market bulls’ assumption that the Fed will aggressively cut rates amid the removal of a trade-war risk, growing economy and rising company earnings. This flies in the face of common sense.
My answer is worth repeating: The debt bubble is getting bigger and will eventually burst. Many investors will get badly hurt. Think of it as a party where almost everybody is drunk and all the drunken people claim that nobody is drunk. I would suggest to investors that they enjoy the party but be aware of the risks ahead.
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