martes, 27 de octubre de 2015

martes, octubre 27, 2015

The Latest Margin Debt Figures Send An Ominous Signal For Stocks
             

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What's more, the level of margin debt relative to the economy is now contracting from an all-time high. In other words, financial speculation as a percent of overall economic activity looks to have possibly peaked from one of the most extended levels we have ever witnessed.

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I like to look at this measure because it's been highly (negatively) correlated with forward 3-year returns in the stock market for at least the past 20 years or so. Right now, this measure forecasts a 45% decline over the coming three years.

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Based solely on these measures, stocks have already likely entered a major bear market that will not end before significant wealth destruction is accomplished. Obviously, this is only one measure, however, so it can't be relied upon on its own. Still, I believe investors would do well to respect the elevated risk in U.S. stocks right now and position themselves accordingly.

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