RIA Advisors Chief Investment Strategist Lance Roberts posted an article on the 25th stating that the US stock market may face a recession risk in the next ten years. He conducted a comprehensive analysis using multiple indicators and chart data to find evidence of an upcoming recession.
(Table of Contents:
Is the Golden Age of US Stocks about to disappear?
Are we in a stock market bubble?
The end of the era of loose monetary policy
Will this time be different?
As the world’s largest economy, the US stock market has been on a continuous rise over the past decade, and the upward trend has become more apparent in recent years. Many believe that the recent rate cuts and the US presidential election will continue to accelerate the rise of US stocks.
However, Lance Roberts, the Chief Investment Strategist at RIA Advisors, expressed in an article published on the 25th that according to warning reports from various institutions, the annual return rate of the US stock market in the next ten years may only be 3%.
In order to determine whether the US stock market is facing a recession, Roberts first discussed the historical returns of the stock market in the article. He pointed out that since 2008, the returns of the US stock market have significantly increased, and many investors may have become accustomed to a high-return investment environment:
Although the US stock market has been providing high returns to investors in the past decade, leading to these high return rates being considered “expected,” the reality may not be so.
Roberts also cited conclusions from a report by JPMorgan:
Are we in a stock market bubble?
The conclusion of JPMorgan’s report also worries Roberts about whether the US stock market is about to decline. In response to this, Roberts first observed stock market valuations and stated:
From the figure below, it is obvious that the current valuation of the US stock market is higher than the historical average. This high valuation reflects both market optimism and a warning signal. If the market is overly optimistic, any slight movement may trigger a significant pullback.
The article then states that in the past decade, the Fed and central banks around the world have continuously implemented extremely loose monetary policies, with near-zero interest rates and quantitative easing measures. This not only lowers borrowing costs but also stimulates investors’ risk tolerance, thereby boosting stock market activity.
However, the goal of fighting inflation in the past two years has forced central banks to tighten monetary policies. Although the Fed has gradually reduced its balance sheet, government spending (such as the Inflation Reduction Act and the Chip Act) continues to provide strong support for economic growth and corporate profitability.
On the other hand, although the Fed has started cutting interest rates, it has made it clear that the federal funds rate is unlikely to return to zero levels. Therefore, if the central banks continue to maintain a high-interest-rate environment and continue to reduce their balance sheets, the once “easy profit” environment will undergo significant changes, undoubtedly putting pressure on future investment returns.
However, when predicting future developments based on historical data, there will certainly be investors who say, “This bull market is different.” However, Roberts states that there are no indicators supporting this optimistic view.
He also states that this article is not predicting the arrival of the next “financial crisis.” Roberts wants to express that, based on a comprehensive analysis of multiple indicators, the future investment returns may be relatively lower compared to the prosperous period experienced in the past eight years, especially against the backdrop of the Fed and central banks beginning to withdraw from market intervention.
Roberts also states that in the next ten years, the market may still experience a bull market, but for most of the time, the returns may be swallowed up by the upcoming economic recession and market adjustments.
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