Get ready for a second wave of the bear market, warns a prominent macroeconomist. He says the country is facing three major headwinds in the coming years that will drag down stock prices.
Yves Lamoureux, the president of macroeconomic research firm Lamoureux & Co., whose track record includes an accurate prediction this past March that stocks were nearing a bottom and would soon turn higher, says the selloff earlier this year was the first wave of a three-wave bear market that will last into 2023.
The Next Bear Market
The second wave, Lamoureux says, is just beginning. He is being marked by wealthy investors exiting the market while speculators flood in.
“So we have a second wave coming, we have very wealthy people taking profits [on stocks] and we see a lot of speculation in the market. I think the market is going to start to go down again,” said Lamoureux during a recent interview.
He believes the second wave will last well into 2021 before another brief rally begins. Ultimately, we’ll see the third wave of the collapse in 2023.
Despite many calls for runaway inflation in the coming years brought on by the excessive money printing across the globe, Lamoureux says we don’t need to worry about inflation causing asset prices to surge.
Instead, he is worried about deflation, and points to three major catalysts that will actually drive prices lower.
Lamoureux says a significant number of jobs will be replaced by robotic and other automated technologies in the coming years. It's a push for green and renewable energies will cause a large drop in oil prices. It's also a pish for a long-term decline in real estate prices.
“Eventually we’re out of the pandemic, but we’re facing these three big threats that are as big as the pandemic,” he said. “What do you expect once you get out of this pandemic? This is what is awaiting, and that has major consequences for investments.”
The Concentration of Power
Lamoureux is also worried about the concentration of power that just five tech stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have over the S&P 500. He says with the rate technology changes, those five names could quickly become obsolete. Additionally, as their stock prices drop, they will drag down the entire index with them.
“I think the big tech names are going to be doing like the big tech names of 2000, and they’re going to go down for years to come,” he said.
“Technology goes fast; you can’t see what’s coming, but there’s too much concentration in these five stocks. That’s the risk of not seeing the future and having all this money into five stocks. I think it spells a lot of trouble, like we saw in 2000.”