Ted Bauman is an economist who is trying to urge investors of a coming stock market crash where equities could fall seventy percent in value. There are still many financial analysts who believe that US stocks will run much higher for the next several years. However, Ted Bauman lists several macroeconomic factors that he feels could kill the bull market in US equities. He first says that stock valuations in the US are at ridiculous extremes. He points out the tech boom in the late 1990’s as the only time in history that the stock market was more overvalued than it is today. He came to this conclusion using the CAPE ratio. The current reading for the ratio is thirty-two. The historical average is only seventeen, meaning that stocks would at least have to fall fifty percent to be considered fair value.
Another factor Ted Bauman feels could bring down the bull market in US equities is rising interest rates. He feels that the US cannot handle too many more interest rate hikes because it will become impossible for the federal government to service its debt. Higher interest rates could also cause a mass exodus out of the stock market and into the bond market. The federal reserve has indicated that they will remain aggressive on raising interest rates because they feel the economy is strong. Mr. Bauman, however, points out that the yield curve is flattening, which indicates the economy may be slowing down.
Ted Bauman is most concerned that the trade war with China and the US could ultimately end the bull market in US stocks. Many respected economists feel that the trade war between China and the US will eventually lead to a global recession and stock markets typically decline in a recession. The Trump Administration placed tariffs on Chinese exports and the Chinese government responded with their own tariffs. China could retaliate against US companies that rely on business with the Chinese. Many of these companies would lose substantial revenues. Eventually, their share prices would reflect this lost revenue. Ted Bauman urges investors to prepare now by adopting low-risk defensive strategies that will enable them to profit in the coming market turmoil.
His Twitter Page: https://twitter.com/TedBaumanGuru