Tags: Michael Lewitt | Credit | market | stocks

Strategist Lewitt: 8 Reasons to Protect Yourself From Stock-Market Drop

Strategist Lewitt: 8 Reasons to Protect Yourself From Stock-Market Drop
(Stock Photo Secrets)

By    |   Thursday, 28 July 2016 01:27 PM

Stocks will decline by the end of the year because economic and business fundamentals are in bad shape, says investment adviser Michael Lewitt.

The U.S. equity market’s record high is an unsustainable by-product of the world’s central banks, which are trying to stimulate economic growth with low or negative interest rates. The problem with that strategy is that governments and companies are taking on too much debt and not making investments that will boost growth, he says.

“The current rally is fueled by blind faith in central bankers’ ability to prop up over-indebted and over-regulated economies around the world,” Lewitt writes in the August issue of his Credit Strategist newsletter. “Central banks are making things worse, not better, and leading markets further out on limbs that are likely to snap off.”

He provides a list of reasons to avoid stocks or hedge investments to protect against a market decline.
  • U.S. corporate earnings have declined for four consecutive quarters.
  • Average job growth over the last three months is a paltry 150,000 in a country with more than 300 million people.
  • The most recent Atlanta Fed GDPNow forecast for 2Q16 was lowered from 2.7% to 2.4%.
  • GDP growth over the last four quarters averaged under 2%.
  • The 2/10 yield curve has been flattening for two years while global interest rates are at record lows (and in many cases negative).
  • American politics are in turmoil.
  • The world is being hit with one horrific terrorist attack after another, literally turning some of its major cities into war zones.
  • Stocks are expensive based on price-to-sales ratios.

Lewitt is also concerned that the growing national debt and looming insolvency of the Social Security system aren’t getting enough attention in this year’s presidential election.

“There is not a scintilla of evidence anywhere that political and business leaders or investors are concerned about America’s $19 trillion deficit and $60 trillion in unfunded future liabilities or the $600 trillion in global derivatives that everyone pretends don’t exist (and my response to that is Deutsche Bank),” he says.

“I didn’t hear a single word uttered about this issue at the Republican Convention and expect similar silence at the Democrat’s shindig in Philadelphia this week. If this is not gross political and moral malpractice on the part of our leaders, I don’t know what is.”

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Stocks will decline by the end of the year because economic and business fundamentals are in bad shape, says investment adviser Michael Lewitt.
Michael Lewitt, Credit, market, stocks
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2016-27-28
Thursday, 28 July 2016 01:27 PM
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