Liquidity moves markets!Follow the money. Find the profits!
But only in the short term…
As far as long-term economic growth is concerned, Faber believes the soon-to-be-POTUS’ financial ideas won’t be enough to save the stock market.
For his part, Trump has proposed several economic policy changes over the past year:
- Cuts to regulations across a broad swath of critical sectors like biotech and communications
- Tax reform that slashes personal and corporate taxes
- At least $1 trillion allocated to U.S. infrastructure
These types of initiatives exhibit Trump’s “pro-business” sentiment, Faber added. “It’s natural that the mood has improved among the small businessman, corporations, and investors.”
And Faber expects equities to keep rising… but only to fall again.
And that inevitable plummet later on, he warned, will “not be very friendly” to investors.
The infamous “perma-bear” then explained his reasoning…
Marc Faber: U.S. Asset Prices Are Grossly Inflated
You see, as far as Faber is concerned, U.S. asset prices are already grossly inflated – meaning, before long, they won’t have any more room to expand.
He expects that the economy will eventually stall out because of this lack of growth, leaving only room for deficits to rise.
This event, Faber claimed, will see Trump “begging the Fed to launch QE4,” which will cause the dollar to weaken and “precious metals to go ballistic.”
Reminder: Quantitative easing occurred when the U.S. Federal Reserve started aggressively expanding its balance sheet shortly after the global financial crash of 2008. After a short break, the Fed started a second QE round in 2010 before launching its third open-ended $85 billion-a-month program in late 2012.
But a return to quantitative easing could see the Fed “overshooting its mark” if it doesn’t time its financial injection to the market correctly. Too much money in the economy causes severe inflation – an issue for which the Fed is likewise not prepared. Inflation is already on the rise since the central bank’s decision to raise interest rates last month. Accelerated inflation could cause a stock market crash because no one buys products they can’t afford.
Faber pointed out there is the potential for profit, however, ahead of the stock market’s eventual crash…
“If someone wants to be in the market,” Faber said, “and I always have part of my assets in equities, then I think other markets than the U.S. are more attractive.”
Chiefly, emerging markets have the most profit potential right now, according to Faber.
An “emerging market” is a developing country whose economy is in a fast growth cycle. It has some characteristics of a “developed” market, but doesn’t meet the standards of a developed market just yet.
Faber noted this morning that in 2017, Argentina, Brazil, and the emerging-markets ETF are already outpacing the S&P 500.
These markets used to be a somewhat obscure niche of the international investing world.
But they’re not anymore.
In fact, the United States and European Union have barely managed to grind out 3% yearly economic growth for a decade now.
But elsewhere in the world, in the emerging markets, growth routinely tops 7% a year – which means there are plenty of potential profit opportunities to be enjoyed, like the six we highlight for investors here…
About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.
Disclaimer: © 2017 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.
The post Marc Faber: Trump’s Financial Plans Won’t Save the U.S. Stock Market appeared first on Money Morning – We Make Investing Profitable.
Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.