Stocks Will Be Flat For An Entire Decade! – Legendary Investors Warn (Ray Dalio & Druckenmiller)
Posted September 26, 2022
Stocks Will Be Flat For An Entire Decade! – Legendary Investors Warn: Are They Right?
Do you know this guy here? That is legendary investor Stanley Druckenmiller. And after the recently published US inflation data spooked investors because inflation in August according to the CPI numbers was worse than expected and because core inflation, which is also closely watched by investors, rose 0.6%, a larger increase than in July, Druckenmiller made a statement that shocked investors.
Druckenmiller made headlines when he warned that there is a high probability that the stock market will be flat for an entire decade and Druckenmiller raised concerns that the Federal Reserve will need to continue to raise interest rates aggressively in order to bring prices under control following the trajectory of what is already the steepest interest rate tightening cycle ever recorded. So whether Druckenmiller has a point, what another heavyweight superstar investor (Ray Dalio) thinks about this topic and how investors best prepare for the decade ahead, this is what we will discuss in today’s video.
The September effect refers to the historically weak stock market returns observed during the month of September. And September 2022 seems to be no different: the S&P for instance is down 5% so far and on September 13th, the NASDAQ actually experienced a particularly brutal trading day during which every single stock of the index ended the day down which is a rather rare event and shows that there is a lot of fear in the market right now.
But, obviously, even if investors take a longer-term view than just looking at one individual month, stocks have also performed pretty poorly with US stocks being down 21% YTD. It seems as if after US stocks had bounced back sharply from the June lows, which had seen the S&P 500 down 23.5% in 2022, we’re about to test these lows again soon. Another graph I show in the video compares the 2022 bear market to previous bear markets based on the magnitude of the drawdown and the calendar days it took stocks to bottom, and obviously stocks could continue to decline, especially if you take into account the Federal Reserve's more recent announcements such as another hefty 75 basis points interest rate hike, bringing interest rates to the highest level since 2008, and announcing that they expect more rate hikes through 2023.
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OTHER LINKS:
○ Druckenmiller's interview with Palantir: https://www.youtube.com/watch?v=0sddHG0D0Y4 12:53-14:03 … 27:20-27:45, 28:10-29:03
○ FT Article “A more sober outlook weighs on investors”: https://www.ft.com/content/3e9d5bc6-60d5-4536-9293-8a09f0ec3157
○ Ray Dalio Article: https://www.linkedin.com/pulse/starts-inflation-ray-dalio?trk=public_profile_article_view
○ Deglobalization or Slowbalization?: https://aspeniaonline.it/deglobalization-or-slowbalization/
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