Are Stocks Getting Ready To Sell-off?

We have been discussing the five year old rally in stocks for a while now, and the rally is beginning to look a little tired. Markets have seen a bit more volatility in recent weeks due to several issues, and that increase in volatility could potentially indicate that we are nearing a top. Although no one can see the future, one cannot argue the fact that stocks have gone higher without looking back for years now, and that the current state of euphoria likely won’t last forever.


More and more experts now appear to be questioning the equity market’s resolve at this point. Among the naysayers is Gloom, Boom and Doom author Marc Faber. Mr. Faber believes that we will see a 20-30 percent drop in stocks from current levels. Mr. Faber has been looking for a sizable pullback in stocks since 2012. Although he acknowledges his forecast has not yet played out, he still holds form in his beliefs. Mr. Faber says that we have seen a significant drop in emerging economies, and that the fact that fewer stocks have been making new highs while the market grinds higher is a cause for concern. Faber also points to the consumer, and some key consumer driven equities. He stated “Wal-Mart shares peaked out in February and since then; the stock has been moving sideways. As an economic indicator, Wal-Mart is a very good say symptom of what is happening to the consumer and if their sales are flat or down, or Coca Cola’s in the U.S., it tells you something about the consumer.”

Faber also says that when he travels, he does not see global economies that are expanding. In fact, he says that although the Asian economy is not in recession per se, it does appear to have slowed significantly or it is seeing no growth at all. Faber also went on to discuss the Fed and its monetary policy. Faber stated “This is a very mature economic recovery…It would seem to me that the monetary policies that the central banks pursue are negative for economic growth, but they are positive for asset price increases. As a result of asset price increases, lots of goods have become unaffordable for the typical household.” The bottom line, according to Faber, is that people think the Fed will just continue to print money and boost asset prices in the process. When everyone is thinking the same, he says, people are not thinking clearly.

Faber is not the only one sounding the alarm when it comes to stocks at current levels. Yale economics professor Robert Schiller is also concerned. Schiller is a Nobel Prize winner for economics and has been in the business of examining bubbles, booms and busts for 40 years. According to Schiller, markets are overbought and warrant caution. Schiller says that the price- to- equity ratio is at 26 currently. Back in 2007, this indicator reached a reading of 27. We all know what happened in 2008 and 2009. Schiller says it may be time to tilt investments away from the U.S. – and he also suggests people do not get greedy.

Considering that more and more experts seem to be growing weary of stocks, perhaps now is the time to look at diversifying. To learn about the potential benefits of adding precious metals to your portfolio or IRA, contact an Advantage Gold specialist today at 800-341-8584

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