Experts Make Frightening Stock Market Predictions
The first of three experts to sound the alarm about an imminent stock market crash was Bill Gross. Once known as “the bond king” when he was at Pacific Investment Management Company, LLC, Bill Gross warns that stock market risks are at their highest since 2008. Instead of buying low and selling high, which is the basic investment formula for any instrument (and for life itself), investors are simply crossing their fingers. (Source: “Bill Gross says all financial markets are ‘increasingly at risk’,” CNBC, June 13, 2017.)
But dire stock market predictions are coming from many sides of the investment analysis spectrum. Investors are not thinking. That’s what Swiss investment expert Marc Faber says. Faber, ever a pessimist, has made important calls in the past. He is most famous for having predicted Black Monday in 1987, along with other prominent stock market crashes. Faber, whose perhaps-excessive tendency to “call it as it is” has not minced words about the current state of the financial markets.
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Faber suggests that the chances of a stock market crash are now high. He says that, sooner or later, this bubble will burst and people will lose “half of their money.” (Source: “Marc Faber—aka Dr. Doom—warns that in financial markets ‘there is a bubble in everything’,” MarketWatch, June 1, 2017.)
Faber argues that Wall Street’s performance in 2016/2017 reflects fairly faithfully that of 1986/1987, with current quotes at a steep pace since the precipice of October 19, 1987. That would be when the Dow Jones index lost over 22% of its value.
Not to be outdone by the others’ stock market predictions, Ray Dalio has some words of wisdom. Or rather, Dalio wants investors to get back to reality. He too fears that a stock market crash is now a real possibility, but Dalio’s fears are more structural. In other words, he doesn’t see the problem as coming from the markets themselves, as much as he does from the overall economic and political situation.
Dalio worries that President Donald Trump, whom he supported in the last electoral campaign, has strayed from his campaign promise to “Make America Great Again,” as it were. Dalio, a hedge fund manager and founder of Bridgewater Associates, LP, felt that Trump would focus on overall economic growth in the United States.
Instead, says Dalio, Trump has fallen into that Washington syndrome whereby foreign problems take up more time than matters of great domestic importance. (Source: “Ray Dalio Says Populism May Be a Bigger Deal Than Monetary and Fiscal Policy,” Bloomberg, March 22, 2017.)
Dalio does expect a stock market crash but, more than that, he fears total economic collapse. He sees the current global political situation as highly volatile. He fears that the U.S. could trip into another major war.
Should You Worry?
Gross, Faber, and Dalio are not alone in giving such stock market predictions. Others are worried as well about the state of the economy and the risks for the markets. The world in 2017 is far more complex and dangerous than it was in 1987 and even in 2008. Since then, we’ve had tectonic shifts in superpower politics and a total disruption of the Middle East.
To better navigate the risks and high volatility, and possibly even profit from it, consider the following possibility: “The Great Crash of 2017.”
