Ted Bauman has been advising individuals to start adopting defensive investing strategies. He is of the opinion that the bull market in US stocks has about run its course. He admits that there is still a little more room potentially for equities to rise, but he feels a stock market crash is just as likely to happen. Ted Bauman is an economist who spent much of his life living abroad in South Africa. He currently writes three newsletters for Banyan Hill Publishing. He has advised his subscribers to be cautious regarding US equities because he feels there are several potential catalysts that will kill the US bull market.
Ted Bauman feels that rising interest rates could prick the stock market bubble and end the bull market. The federal reserve has been rather aggressive in raising interest rates. Mr. Bauman points out that the US economy may not be able to handle a fed funds rate of four percent because of all the debt in the system. At the current pace of the fed rate hikes under Chairman Jerome Powell, the fed funds rate would hit four percent by 2020. Other analysts feel that the US economy will not be able to handle rates as low a three percent.
Ted Bauman feels the bull market in US stocks could also end simply because the US stock market is too overvalued. After using the CAPE ratio to value the US equities market, the ratio gave a reading of 32, which is almost twice as high as the historical average. Mr. Bauman feels that it is only a matter of time before stocks return to their fair value. He feels that stock prices will start to fall rapidly when more investors come to the same conclusion regarding the overvalued stock market.
The trade war is the potential catalyst that worry’s Ted Bauman the most. He points out that China has done very little to retaliate against the measures the Trump administration has already taken. The Chinese government could easily hurt US multinational corporations that rely on doing business in China. This could result in many billions in lost revenue, eventually reflecting in the share prices of these companies.
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