Massive monetary stimulus programs adopted by central banks across the globe have pumped up a variety of assets, including stocks and real estate, creating a risk of a major correction, says real estate investment legend Sam Zell, chairman of Equity Group Investments.
Central banks have pushed interest rates toward zero, and "when you cut the cost of carrying [any asset, it] pushes up the price," he told CNBC
The stock market is particularly at risk, with the S&P 500 index less than 3 percent below its record high. "There's a significant and growing disparity between the stock market and the economy," Zell said. "I'm looking for demand, and I find very little of it."
Economic growth totaled only 2.2 percent in the fourth quarter, and many analysts believe it shrank further last quarter.
Meanwhile the dollar's surge to multi-year highs against a range of currencies in recent weeks is putting the kibosh on U.S. corporate earnings, giving a boost to foreign competitors, Zell said.
The foreign competitors are "playing with funny money. I just think that it's very hard to imagine that the current scenario can continue," he added.
"I don't think there's ever been an example of us doing great when the dollar is very strong and everybody else's currencies are very weak."
This may be a piece of evidence to back Zell's pessimism on stocks.
U.S. stock funds have suffered a $44 billion outflow so far in 2015, the worst start for a year since 2009, according to a report from Bank of America Merrill Lynch (BAML) obtained by MarketWatch
And what caused the move? Weaker-than-expected economic data, the dollar’s upward surge and overly bullish sentiment, according to the BAML strategists.
Earnings reports need to improve for stock fund inflows to increase. "Restoration of EPS [earnings-per-share] confidence" is "needed for US inflows."
As for the economy, growth slowed to 2.2 percent in the fourth quarter from 5 percent in the third quarter, and many analysts think it will shrink further this quarter. When it comes to the dollar, it has hit multi-year highs against a range of currencies in recent weeks.
Many investors are concerned about stock valuations. Robert Shiller's cyclically-adjusted price-earnings ratio for the S&P 500, which includes 10 years of earnings, stands at 27.3, topped only by 1929, 2000 and 2007. Those, of course, were periods that preceded market crashes.
Meanwhile, investors are enthusiastic about Europe's lower valuations. European stock funds have seen a $46.6 billion inflow so far this year.
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