Nobel laureate economist Robert Shiller warns that it is “a somewhat anxious, worrisome time” for investors, and the economic uncertainty won’t be lifting anytime soon.
Stock-market volatility, uncertainty about the Federal Reserve’s interest-rate plans and a host of global economic fears all justifiably have average investors on edge.
Investors have grown used to near-zero U.S. rates and a booming Chinese economy — the world's second-largest after the United States. No one knows how the global economy will manage as China's economic problems become more apparent.
Many investors aren't waiting to find out. They've been dumping stocks with a vengeance. When investors feel unsure about the future, many tend to panic. The July-to-September quarter was the S&P's worst since 2011.
And adding to that, the Yale professor told Fox Business Network, is a generally manipulative and deceptive economic environment.
“People can be manipulative and deceptive, I guess we teach that to our children, but what we don’t emphasize is how an economy actually incentivizes that, unless there is a civil society watching, it incentivizes that, it’s a fundamental problem with completely unregulated or unwatched free markets.”
He cited Volkswagen’s diesel emissions scandal.
“A recent example is Volkswagen, they, a venerable corporation, put in a defeat device in their cars, it was fraud and they got away with it for a long time,” he said, “…we get into an atmosphere where everyone is doing it,” he said.
He urged the public to fight back.
“So that’s why we need, we call them heroes, people who stand up for what’s right in business,” he said.
“A business person can think, ‘I don’t want to do these other things, I’m a moral person,’ and to some extent there’s some latitude to do that, but you can’t do it too much or you’ll go out of business …I don’t fault people for accepting some compromises, you have to survive in business, you have to judge someone on balance.”
Shiller is far from alone in his dire expectations for the U.S. economy.
Bill Gross, who in January predicted that many asset classes would end the year lower, said U.S. equities have another 10 percent to fall and investors should sit out the current volatility in cash.
The volatile market reaction to the lackluster U.S. jobs report last week shows that markets, especially stocks, high-yield bonds and some emerging market debt, are trading like a casino, Gross told Bloomberg News.
“More negative numbers lie ahead and if you define a bear market by a 20 percent correction, at some point — that’s six to 12 months — we’ll have a classic definition of a bear market, meaning another 10 percent downside,” he said.
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