Those concerned about the new highs we're now seeing in various U.S. indices may have reason for such concern. Some analysts in the conservative camp believe that current market fundamentals point to severe overvaluation. This level of exuberance may be irrational as central banks, the Federal Reserve in particular, continue to print as much money as is necessary to keep markets functioning normally.
The money that has been printed, or created via bond issuances is not free. Debt creation at a time like this will ultimately make the need for economic growth ever more present for future generations. If growth does not materialize, we could be due for a major market correction. We could see a much sharper drop than the one we saw in March; the drop in March has now been more than offset by global central bank activities.
I'm also of the belief that a presidential change in the United States is more likely than not at this point in time. According to the most recent data, many economists and analysts expect a significant correction resulting in a Democratic Party victory. At this point in time, this market risk is not being priced into financial markets as I believe it should. I would encourage all investors to be patient at this point in time, and would encourage keeping some cash on the sidelines, until early 2021 for the reasons described in this article.
Invest wisely, my friends.
