Marc Faber Expects a Bear Market to Unfold
During an interview with Fox Business News Network’s Maria Bartiromo, longtime market observer Marc Faber discussed the implications of Chinese and other emerging market volatility on the U. S. stock market.
Faber stated, “we have a big selloff in emerging economies. In dollar terms many emerging markets have tumbled. The U.S. is essentially the last man standing, and I think it will spill over to the U.S.” He added, “GM – about 35 percent of the sales are in China and close to 50 percent of the profits come from China… in July car sales were down 7 percent, but more to come.”
Faber believes that gold price weakness this year was due to the Chinese stock market dropping 30%, in turn prompting margin calls, and forcing the selling of gold.
Bartiromo posed the question as to what prompted the recent Chinese currency devaluation.
“We don’t know exactly why China began to weaken its currency. It could be because of massive capital outflows. It could also be a warning signal to the world that if the world, notably the U.S., doesn’t treat China fairly — and they have some reasons to believe that certainly from their perspective, that they also can embark on economic and financial warfare,” Faber said.
Faber added, “The Bank Credit Analysts said there will be a bloodbath in emerging economies — we already had one to a large extent. If you adjust the poor market performance and the currency weakness — probably more to come — but I don’t believe the U.S. will not be affected at all and I would look at valuations. Valuations are not exactly cheap in emerging markets but they are becoming reasonable… I think the U.S. will be the last to fold”
In an interview with CNBC’s Brian Sullivan, Faber said the U. S. stock market was in a stealth bear market as, even on recent days where the indexes were higher, new lows outnumbered new highs. Faber expects the stock market to end the year substantially lower.
In March, Faber indicated the European and Chinese stock markets would outperform the rest of the world (link).