Who Will Buy The Market When This Happens?
In today’s update I would like to discuss a major risk for the US stock market.
As we all know, current markets are driven by 1) Central Bank printing machines, 2) Share buybacks funded by cheap debt / record low interest rates and 3) Record High Margin Debt
The first driver will be gone, soon.
Driver Nr. 2
Now that interest rates are on the rise, the impact of the second driver, share buybacks funded by cheap debt, will diminish.
Driver Nr. 3
Now, let’s take a look at the 3rd driver: Margin Debt, at record highs, same as before any major downturn.
So, should we expect another 2000 or 2007 episode?
Could be, but in my view, it’s way more likely to see a drop of 25%-35% over the period 2018-2019 after which the stock market is likely to double into 2032, the peak of the flight to private assets.
This long term view is explained here: my new Investment Fund “Bubble Prep Fund” in which I will play the 3 major bubbles that burst in the next 10 years.
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