How many top Wall Street players need to come out and question the strength of the equity markets, before we see stocks pull back?
Many financial skeptics question the appreciation in bitcoin and other cryptocurrencies, yet ignore the rise in stocks since the Trump election without any economic growth to counterbalance or justify the run up.
Janus’ bond maven Bill Gross warned that the financial markets are at their most vulnerable since the 2008 financial crisis with investors paying too high of a price for the risks that they are taking.
“Instead of buying low and selling high, you’re buying high and crossing your fingers,” said Gross at a New York conference on Wednesday.
Gross pointed his finger at the Federal Reserve and other central banks pumping cash into stock and bond markets creating inflated asset prices without creating economic growth where individual savers and banks end up paying the penalty.
“Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced,” said Gross.
Gross’s latest warning follows a similar doom stated by global investor Marc Faber, who last week proclaimed the US markets are caught in the midst of a gigantic asset bubble.
“There is a bubble in everything. Nothing in asset price is very low,” Faber proclaimed.
In conversations with market participants they do sense this, but take the notion of “Why Fight the Fed.” In other words, Janet Yellen & Co. are in the market with their fire hose of monetary policy, buying assets, just go with the flow.
Curiously, Friday June 9th appears to be a date where there may be some reckoning by the markets. I don’t have a trigger for this but it seems to be an important milestone.
Is it coming out ex-FBI Director James Comey’s testimony? Is it a result of an announcement from the Fed or the result of the English elections?
I do not know, but Friday could begin a shift in the market, so be aware.