July 2016 – Are we setting up for another hard fall in the markets?
Investors Intelligence Stock Market Advisors‘ sentiment reading have been running well up in the ‘hot zone,” signaling excessive optimism, over the past two months. Bulls / Bulls + Bears readings have been running consistently at or above the magic ’65’ level over the past two months, reaching as high as 71.8% in the June. These levels have strong ‘negative’ correlations future stock market performance.
The Boston-based hedge fund heavyweight GMO is also predicting trouble ahead…
ZeroHedge 7-11-2016: 2007 All Over Again…
Boston-based money management firm GMO… is famous for predicting the last two financial crashes ahead of time, and firm chairman Jeremy Grantham is a legendary figure on Wall Street. His quarterly letters are required reading by anyone managing other people’s money.
GMO is usually seen as too bearish, but in an industry that is generally far too bullish that’s no bad thing. And often forgotten is that the firm has made some terrific contrarian buy recommendations too — such as emerging markets and value stocks at the start of the last decade, and of stocks generally in the wake of the 2008-09 crash.
Matt Kadnar, a member of the firm’s asset allocation committee [said this] … about how GMO perceives the current global investing environment:
1. The overall investment outlook is really, really dismal. “There is no asset out there that is cheap,” Kadnar says. None.
2. The outlook for U.S. stocks is terrible. GMO’s central forecast — which is a directional estimate more than a precise prediction — warns that U.S. large- and small-cap stock indices are now both so overpriced compared to history that they will probably lose value, compared to inflation, over the next seven or so years.
3. In the wake of the emerging markets slump and now Brexit, investors are becoming almost as dangerously fixated on U.S. stocks as they were (disastrously) in 2000, according to GMO. Kadnar says that once again, clients are starting to ask why anyone needs to own anything other than the S&P 500.
4. Investors also are likely to end up losing — after inflation — over the next seven years or so on U.S. bonds, cash, and small-cap international stocks, GMO’s current central forecast predicts. The firm also sees minuscule post-inflation, or “real” returns, on both international large-cap stocks and emerging-market bonds.
Equity investors have been fooled twice in the last six months… is 3rd time the charm?
Governments and Central Banks need a new strategy to create strength and financial stability at ground level. Pumping trillions of dollars in liquidity into the global banking system over the past eight years has done nothing to provide that.
It is time to infuse the system with new ‘ground level’ power:
The Leviticus 25 Plan 2017 – $75,000 per U.S. citizen The Leviticus 25 Plan 2017 (1566)