This time Albert Edwards warns against the combination of growing interest rates, re -evaluated share prices and overheated real estate market, which can lead to another violent correction on financial markets.
As Interia reminds, Edwards gained international fame as one of the few strategists who predicted the crash on the stock exchange in 2000, known as an internet bubble. Then it is a sharp decline in the prices of technology companies – especially the so -called Dot-com-led to the collapse of the NASDAQ index, which during the year lost up to 95 percent. values for certain companies.
Today, when Wall Street reaches further records, Edwards again warns against investors' excessive optimism. “Euphoria in markets rarely ends quietly” – he emphasizes in his latest analysis.
“Banie of everything” – actions, real estate and bonds on the edge of the breakdown?
Strategist Societe Generale claims that the American stock market is in a state of “bubble of everything”. He indicates historically high valuations of shares, which he thinks are unstable. As an example, he gives Schiller index, which reached level 38 – one of the highest in history. Also, the price/profit (P/E) indicator for the S&P 500 index remains at a dangerous level.
Edwards draws attention to the paradox, which we are currently observing in the markets. Despite the growing profitability of long -term government bonds – which usually reduce the attractiveness of shares – the prices of American companies are still rising. Since October 2022, stock indexes gained as much as 78 percent. values. “However, I do not think that they can keep it longer,” he warns.
A bubble on the real estate market?
Edwards also causes the real estate market, which – he claims – remains extremely resistant to corrections. After increased prices caused by Pandemia, the house price indicator compared to US revenues has practically not changed. Meanwhile, in other developed countries, such as Great Britain or France, this indicator has fallen. The strategist suggests that the American real estate market may be close to cracking.
Edwards points to Japan as a possible inflammatory point of the global economic crisis. The monetary policy of the Bank of Japan and the growing inflation (3.3 percent in June) can lead to the destabilization of the third largest economy in the world. The strategist warns that the possible withdrawal of Japanese investors from American assets – financed with cheap yen – could cause mass sales on Wall Street.
Source: Interia
