Is the US stock market living on borrowed time?
Is The US Stock Market Rally Living On Borrowed Time?
October 9 (King World News) – Gerald Celente: Interest rates are down, consumer spending is up, corporate earnings are strong, bond values have risen, and tax cuts are giving corporations more money for growth. The tariff war has yet to reignite serious inflation and many analysts now say the tariffs are unlikely to cause a recession.
Fueled by optimism and riding on positive numbers, stock prices have set record after record this year. The Dow Jones Industrial Average has grown by 17 percent since the year began, the NASDAQ by 9.1 percent, and the Standard & Poor’s 500 by 14 percent.
Some investors think all of this is too good to last.
“The characteristics of this rally do worry me a little,” Nate Thooft, chief investment officer at Manulife Investment Management, said to The Wall Street Journal. “It feels a little ‘late inning’.”
Companies making initial public stock offerings have seen their share prices jump an average of 34 percent on their opening days, the highest average since at least 2000, chief strategist Callie Cox at Ritholtz Wealth Management wrote in a note.
Shares of companies listed in the S&P are the most expensive they have ever been, compared to companies’ actual value, the WSJ pointed out.
The market’s exuberance has lured individual investors, who now are engaging in what the WSJ called “a 2021-esque wave of speculation.” Opendoor Technologies, a real estate platform, became the new meme stock, rocketing up 398 percent this year and, on one day, accounted for 13 percent of all market trades, Dow Jones market data showed.
Also, special-purpose acquisition companies (SPACs) have returned.
A SPAC or “blank-check company” is a special category of company that goes public, typically at $10 a share, even though it has no assets. When it has stockpiled enough capital, the SPAC buys and merges with a promising company that is not prepared to go public through the usual regulatory channels.
After the merger, the SPAC disappears, and its shareholders then own shares in the company the SPAC bought.
Because SPACs’ takeover targets are private companies that have not filed papers to make a stock offering, they can make unsupported, blue-sky financial projections about their future, which companies planning to go public by the usual route are banned from doing.
SPACs were a Wall Street fad in 2021 and 2022, drawing attention, and investments, from celebrities including Shaquille O’Neal and Jay-Z as well as individual investors hoping to cash in on the next undiscovered Apple or Tesla.
However, many of the new companies failed to live up to their hype, dozens of SPAC companies failed, and investors lost tens of billions of dollars.
Now, fueled by market euphoria, more than 90 SPACs have collected about $20 billion this year from speculators.
Underlying these warning signs is the relentless rise in investments in artificial intelligence and related tech stocks.
While many expect the market’s rally to continue, most have one foot out the door and are ready to bolt at the first solid sign of a reversal.
As Bob Doll, CEO of Crossmark Global Investments said to the WSJ, “we’re in a high-risk bull market.”
TREND FORECAST:
As we see it, the equity markets are overvalued. We are forecasting a strong market correction. The “Magnificent Seven” megatech companies—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—recently accounted for 37 percent of the S&P’s entire market capitalization, the narrowest foundation on record, the WSJ reported.
And, we are forecasting a Dot-com Bust 2.0 that will bring down the Magnificent Seven and the over-inflated, money-losing, A I stocks.
Gold’s prices are a gauge of investors’ anxiety about the future, as so far gold prices have spiked at the fastest rates so far this year through September than in any year since 1979. Silver futures, also a hedge against uncertainty, have risen 60 percent this year.
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