The biggest names in finance are coming around to a view that seemed unlikely a few weeks ago: Stocks are vastly overvalued.
Such bearishness starkly contrasts with the optimism that pushed the S&P 500 Index up 26 per cent from its March low. And the warnings have caught the attention of President Donald Trump, who’s facing re-election and has seen his plans to run on a booming economy shredded by the virus. Trump attacked “so-called ‘rich guys’” in a tweet Wednesday.
— Donald J. Trump May 13, 2020His criticism is unlikely to sway Wall Street professionals. The S&P 500 Index is down 3.8 per cent this week, and investors and economists are forecasting further declines amid a prolonged struggle to right the economy. Druckenmiller said Tuesday at the Economic Club of New York that his analysis showed liquidity that drove markets higher will soon shrink as Treasury borrowing crowds out the private economy and even overwhelms Fed purchases. The 66-year-old said he’s never seen a time when the risk of owning stocks so outweighed the potential gain.
Other marquee investors also have taken more defensive stances recently. Tudor Jones, who runs Tudor Investment Corp., told clients in early May he was investing in gold and had even put a small percentage of his firm’s assets in Bitcoin as he looked for havens. Meanwhile, Carl Icahn said in late April that he wasn’t buying stocks. Instead, he was hoarding cash and shorting commercial real estate.
A few of the more bearish hedge fund managers already sounded the alarm earlier this year. Crispin Odey told clients in a March update that “nothing is immune from the slowdown.”
Yada yada yada. One says they are over priced, one says they are not. One will be a hero depending on what happens next. Neither has any real idea.
We will likely need outside the box strategies to bring the market & economy back. Even better is building the sustainable economy while doing so.
Current “overvalued” prices have nothing to do with them? Just how “heavy” are they really? Meanwhile they have all the mechanisms ready to profit from the fall after “light” weights jump on their words. 🤑🤑
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