An Introduction
In Florian Grummes latest article he states that, overall, global financial markets are facing increased risk and susceptibility to profit-taking after the steep and partially bubble-like price increases in U.S. tech stocks in 2024. Hence, significantly increasing volatility is likely to make life much more difficult for investors across all asset classes this year.
He goes on to say in further edited and abridged excerpts that:
The current indicators surrounding U.S. financial markets exceed anything known so far. Just 10 stocks make up 40% of the S&P 500’s market capitalization, while the huge U.S. stock market itself represents almost 50% of the entire planet’s market capitalization.
- Based on yields, investors consider these stocks a safer bet than 10-year U.S. Treasury bonds, a measure not seen in 50 years.
- Moreover, Trump’s planned U.S. tariffs could significantly unsettle investors and affect the global export economy. A protectionist trade policy always exacerbates international trade tensions and endangers the global economy.
- In addition, increased production costs due to import tariffs can reduce the profitability of companies and fuel consumer prices.
Jim Rogers and Warren Buffett Have Recently Drastically Reduced Their U.S. Stock Quotas
Jim Rogers and Warren Buffett, two of the world’s best-known investors, follow the principle of being cautious when others are greedy and have recently drastically reduced their U.S. stock quotas. These two completely independent decisions are based primarily on the assumption of an overvaluation of U.S stock markets and the fear of an impending recession in the U.S.
Buffett’s famous “Buffett Indicator” (see below), which measures the ratio of stock market value to GDP, points to significant overvaluation.
Buffett has been a net seller of stocks for eight consecutive quarters…and is diversifying his portfolio by investing in other sectors. Rogers warns of a “very bad” economic crash due to the increased global debt burden and has sold all his U.S. stocks and is even considering shorting stocks.
Their search for alternative investment opportunities underscore the concern of these two renowned investors about current market conditions and valuations in the U.S. stock market…
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