Janice R. Andrews
One well-known voice in the financial community is raising the alarm as the world’s stock markets continue to soar. The famous author of The Lead-Lag Report and portfolio manager of Tidal Financial, Michael Gayed, has sent out a harsh warning: the stock market is on the verge of a sharp and perhaps catastrophic collapse.
Three warning indicators that are present in the current state of the market are the source of Gayed’s concerns. He recently emphasized the rising costs of gold, utility stocks, and long-term Treasury bonds in an opinion piece for InvestorPlace. The simultaneous growth of defensive assets, which are typically thought of as safe havens during periods of market turbulence, is an uncommon event that, in Gayed’s opinion, may indicate impending disaster.
“It’s uncommon for these three traditionally defensive asset classes to move in such harmony,” Gayed said. “Historically, this kind of movement has been a precursor to a broader market shift.” Amidst the excitement of speculative trading, he underscored the importance of their coordinated movement and cautioned investors to pay attention to the warning signals.
Gayed’s worries are consistent with those of other Wall Street bears who have long voiced worries about the skyrocketing bubble in stock prices. There have been many parallels drawn between the 2008 financial crisis and the dot-com boom, with well-known economist David Rosenberg calling attention to the huge impact of mega-cap IT companies in the S&P 500 as a reason for concern.
According to Gayed, the present market frenzy is more suggestive of a risky ascension into unsustainable territory than it is of a robust bull run. He expressed his view that the present market circumstances are fragile in an op-ed published in February, asking, “How the hell is this some bull market when it’s literally the entire world cheering the widening of the wealth gap?” “I continue to believe that we are all in grave danger, and time will (mostly) confirm my initial assessment. Every bubble bursts.”
Surprisingly positive investor attitude persists in spite of these dire warnings. The most recent data from the AAII’s Investor Sentiment Survey shows that more than half of investors continue to have a favorable view on equities for the ensuing six months. Furthermore, according to a study conducted by the Yale School of Management, an astounding 81% of individual investors were positive about the Dow’s chances for the remaining part of the year—the greatest level of bullish attitude since 2007.
Gayed warns against complacency in spite of this optimism, though. The underlying hazards presented by an overheated market may be hidden by the widespread belief in a gentle landing and anticipation of further rate reduction from the Federal Reserve. “All bubbles end,” as Gayed menacingly cautions, and the repercussions of disobeying the warnings might be disastrous.
Even while the stock market is rising inexorably, analysts like Michael Gayed are advising caution. Investors would be well advised to heed the warnings and take a more cautious approach to their investing plans in light of the numerous indications that point to a possible disaster. History has demonstrated that there can be disastrous effects from disregarding the warning indications of an approaching market slump.
