Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Stock Market Will Tank Hard

Stock-Markets / Stock Market 2017 May 24, 2017 - 11:16 AM GMT

By: The_Gold_Report

Stock-Markets

The script for 2017-2018: Melt Up, then Global Meltdown, says Lior Gantz, editor of Wealth Research Group, who sees industrial metals, specifically silver and zinc, leading a commodities charge, while broad indices take a nose dive.

The market cap of the NASDAQ has reached a new all-time high of $8.705 trillion recently, which is equal to 45.8% of U.S. GDP. The long-term median NASDAQ market cap/GDP ratio is only 24.91%.


The current NASDAQ market cap/GDP ratio of 45.8% is the highest since October 23, 2000. At that time, the NASDAQ was trading for 3,469 and over the following 11 months, the NASDAQ declined by 59% to 1,423.

Out of the last 6,162 trading days, going back to the beginning of 1993, the NASDAQ has only been more overvalued than today, with a market cap/GDP ratio exceeding its current level of 45.8%, on a total of just 201 trading days, or 3.26% of the time. This means the NASDAQ's valuation is currently at a percentile of 96.74%—it's extremely overvalued and in a crash warning zone.

I'm certainly not the only one that thinks the U.S. markets are headed towards a nose dive—Ray Dalio, the largest hedge fund manager in history, and Warren Buffett, the greatest investor ever, share this exact view. When it gets messy, these chaos hedges will be critical.

Wealth Research Group Doesn't See This Crash Yet, Though!

While I know markets are very expensive, last week's 2% decline, which caused immense trader fears, showed me that we're not in bubble mania yet. Investors don't believe the bull market yet, and they sell at any slight news of trouble. This means the "melt up"—a stock market bubble fueled by central banking intervention—is still the major theme in investors' minds.

The markets are hitting 52-week highs, and the one-year historical outlook is clear-cut: the market is headed higher from here, as contrarian and foolish as it sounds. Retail amateurs are still not convinced of buying stocks, therefore the market will get even more expensive so that they'll believe they're missing out, and then pros will let them have the leftovers before the market rolls over on them like a great Hawaiian wave.

The professionals are monitoring global markets at the moment and seeing opportunities in cheaper Europe and in strengthening China.

They're also looking at the Fed rate hike policies.

One-Year Returns After Extremes

As you can see, after one-year highs, the markets perform well, so shorting them isn't smart at all.

Energy and Materials Show Most Outperformance During Rate Increase Period

If the Fed raises rates again this June, traders would go all-in on commodities because China and India are taking care of their problems relatively successfully.

The 1971–1974 period, which is similar to today's environment, shows that materials (industrial metals) will be absolute outperformers.

Then, after this coming one-year "melt up" phenomenon ends with a blow-off on a global level, the meltdown begins. Professionals will be looking to position with non-correlated asset classes in advance, and gold stocks will see a tidal wave of money pouring in for the first time in years, right when their fundamentals couldn't be cleaner and healthier.

Investors already have a rear view mirror gauge of what the panic will look like, judging by last week's one-day plunge.

Importance of Diversification

This chart shows what will dictate fund decisions in the meltdown, and the longer it melts up, the more violent the meltdown will be and the more gold stocks will be valued.

WRG's Script for 2017-2018—Melt Up, Then Global Meltdown:

Right now, the U.S. economy is functioning at its highest capacity. There is little room for improvement, so stocks are already fully priced and any further increase in prices makes the indices more risky of bursting their bubbles.

Long-Term View of Volatility

As the Feds keeps raising rates, materials—specifically industrial metals, like zinc and copper—will be big winners.

Then, the markets will reverse. There will be no warning sign and no idea when, but a panic will commence.

Five years after 12-month high periods, the markets have historically been lousy investments.

Funds and institutions will flock to the commodities sector, with an emphasis on precious metals, and a 1970s-style bull market will be in full throttle once the Fed lowers rates again!

Lior Gantz, an editor of Wealth Research Group, has built and runs numerous successful businesses and has traveled to over 30 countries in the past decade in pursuit of thrills and opportunities, gaining valuable knowledge and experience. He is an advocate of meticulous risk management, balanced asset allocation and proper position sizing. As a deep-value investor, Gantz loves researching businesses that are off the radar and completely unknown to most financial publications.

Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.

Disclosures:
1) Statements and opinions expressed are the opinions of Lior Gantz and not of Streetwise Reports or its officers. Lior Gantz is wholly responsible for the validity of the statements. Streetwise Reports was not involved in the content preparation. Lior Gantz was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

Charts provided by Wealth Research Group


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in