Things are getting increasingly turbulent on Wall Street. A series of economic and financial indicators are pointing to the inevitable downfall of the stock industry, a following recession, and an inflationary spike like no other. Even legendary investors, experts, and banks are sounding the alarm about the looming crash and the burst of several other asset bubbles formed over the past two years. All factors are coming together to create the perfect storm for equities – and the meltdown isn’t just going to affect the near-term outlook but result in damages that are likely to stick with us for many years to come.
Since early last week, many notable industry players came forward to alert about an imminent stock industry crash. The long-awaited shift in monetary policy by the Federal Reserve has finally hit US markets, sparking panic amongst investors while inflation continues to impact the economy and the finances of the average consumer. One of the most striking remarks came from the “Big Short” investor, Michael Burry. Amid a scenario of a slumping economy and extreme overvaluation in financial markets, equities are poised to tumble, the investor said.
Over the past two years, the investor has repeatedly warned about excessive asset valuations – but now a breaking point seems closer than ever. To make things even more complicated, Burry also painted a grim picture of inflation. He said that the Federal Reserve isn’t hiking finance charge rates to fight rampant inflation and soaring prices, but to have room to prop up markets once this giant bubble explodes.
Financial expert and best-selling author, John Mauldin, agrees that things are getting too rocky on Wall Street. The famed economist doesn’t believe that the Fed will be able to tighten its policy in a way that doesn’t result in a major recession. “Powell and his crew hope to engineer the fabled ‘soft landing,'” Mauldin said in a commentary published a couple of days ago. “I really doubt they can do it.”
Recession forecasts have started to pop up in large numbers following the rise of the 2-year Treasury yield above the 10-year in March. On a similar note, the famous author of the best-selling book Rich Dad Poor Dad, Robert Kiyosaki, sounded the alarm on Friday about a hyperinflationary crisis and depression in America. He noted that the biggest bubble burst in history is fast-approaching, and some cut-throat repercussions are going to hit investors and the average American really hard.
The industry veteran warned that when the bubble finally bursts and the stock industry crashes, the 401k will fail, and retirement plans and pensions will be unpayable. Baby boomers’ retirements will be stolen, and the $10 trillion in fake money spending is ending, he said, calling the U.S. government, Wall Street, and the Federal Reserve thieves.
The prospects of a sudden downturn continue to grow. In the meantime, short-sellers are securing their positions to navigate through the coming stock industry crash. Even Goldman Sachs is warning about the potential for a lost decade for passive investors, especially those who stick with historical allocations like the 60/40 investment mix, which is named for its allocation split of 60% equities and 40% high-grade debt.
In essence, all of this means that when the industry plunges, returns are likely to be dismal for the next ten years or so. In such an unprecedented environment for most investors, the stock industry is behaving in unprecedented ways, too. But the bubble can only grow to a certain extent before it bursts – and it has already been stretched to its limit – so, right now, pouring more money into risky resources isn’t an capital, but a gamble. At this point, the main question is: how many out there are willing to lose everything?
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