Tags: Former Wells Fargo CEO | stock Market | Bubbles | Invest

Former Wells Fargo CEO: Market Bubbles Ready to Pop This Year

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By    |   Monday, 04 Jan 2016 05:44 PM

Bubbles in bonds, commercial real estate and the stock market are on the brink of popping this year, former Wells Fargo Chairman and CEO Richard Kovacevich said Monday.

The bubbles have been created by too many years of the Federal Reserve's easy money policies, he told CNBC.

As for the stock market, Kovacevich predicted flat returns to up 5 percent for 2016. "As long as we have relatively slow economic growth in the 2 to 2.5 percent [range], I don't see any reason for the market to do much, if at all."

He said he felt stocks were fully valued 1½ years ago, CNBC explained.

Kovacevich predicted that the Fed will continue to normalize monetary policy. "They have to gradually increase interest rates, hopefully about four times this year and eventually get to 2 percent by sometime in the middle of next year," he added.

Kovacevich isn't alone in his economic warning.

Marc Faber says the U.S. is at the start of an economic recession, clashing with Federal Reserve Chair Janet Yellen’s view that things are improving.

 “I believe that we’re already entering a recession in the United States” and U.S. stocks will fall in 2016, Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg.

However, some U.S. central bank officials have a contingency plan just in case the economy and market do run into trouble this year.

Federal Reserve Vice Chairman Stanley Fischer said it might be necessary for the central bank to increase interest rates if financial markets were overheating, though the first line of defense should be using regulatory tools to prevent bubbles from developing, Bloomberg reported.

“If asset prices across the economy — that is, taking all financial markets into account — are thought to be excessively high, raising the interest rate may be the appropriate step,” Fischer said in a speech at the annual American Economic Association meeting in San Francisco.

He suggested that might be particularly true in the U.S., where many of the so-called macro-prudential regulatory tools to tackle financial market excesses are either lacking or untested. Such tools would include, for example, adjusting lending rules to try to rein in borrowing.

(Newsmax wire services contributed to this report).

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Bubbles in bonds, commercial real estate and the stock market are on the brink of popping this year, former Wells Fargo Chairman and CEO Richard Kovacevich said Monday.
Former Wells Fargo CEO, stock Market, Bubbles, Invest
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2016-44-04
Monday, 04 Jan 2016 05:44 PM
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