The stock market in the US is continuing to break records, but there are numbers of individuals on Wall Street who feel that the bull market is about to come to an end. Economist Ted Bauman is one of the individuals who are not so enthusiastic regarding the stock market because he feels there are factors that will force equity prices down. One of these factors is that stock prices are overvalued on almost every metric. Stock prices are now as overvalued as they were during the Dot Com bubble in 2000. Ted Bauman believes that eventually, these overvalued equities will return to their fair value, meaning they will have to come down.
Ted Bauman believes that the federal reserve raising interest rates will also exert downward pressure on the stock market. He feels that if the Fed Fund rate hits four percent, the bull market in stocks will officially end. Many other analysts are pointing to a rate of around the three percent range taking a toll on stocks. The federal reserve will probably continue to raise rates as long as the US economy continues to do well and could hit four percent by 2020.
Ted Bauman feels that interest rates may never get to four percent and stocks may end up declining due to the ongoing trade war with China. President Trump has claimed many times that the rest of the world, particularly China, has been taking advantage of the United States in terms of trade. Trump feels that imposing tariffs will even the playing field. Mr. Bauman pointed out that retaliation from China may hurt major corporations who do regular business with China. These corporations will earn significantly lower revenues and it will eventually reflect in their share prices. The trade war is the biggest threat to the bull market in Mr. Bauman’s opinion and he believes that if it doesn’t end it will hasten a bear market in stocks.
Ted Bauman is the editor of the Bauman Letter. He graduated from the University of Cape Town with degrees in History and Economics. He specializes in asset protection and low-risk investing strategies. He feels that investors should now take caution in the markets.
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