Marc Faber: Selling Avalanche Ahead, Buy Resource Stocks and Emerging Markets
Faber’s analysis concludes that stocks are very overbought and sentiment too bullish for the Trump rally to continue.
“Very simply, the market starts to go down. As it goes down, it will start triggering selling, and then it will be like an avalanche,” Faber said recently on the CNBC show “Futures Now.” Faber added, “I would underweight U.S. stocks.”
Faber, who supports President Donald Trump, isn’t blaming the new administration for his bearish views.
“One man alone, he cannot make ‘America great again.’ That you have to realize,” Faber stated. “Trump, unlike Mr. Reagan, is facing huge, huge headwinds — including a debt to GDP that is gigantic, as it is in other countries.”
Faber cites interest rates going up, as well as earnings and margins at record levels, as additional risks to the historic rally.
The Dow Jones Industrial Average registered its eleventh record close in a row on Friday. And, if you take a look at just the S&P 500 in February, it’s on track to see the fewest declines in any month since May 1990.
It’s not just the U.S. market that’s been picking up big gains so far this year, however. Faber points out markets in Mexico, Brazil and Asia have been up ten percent or more.
However, Faber is not predicting gloom and doom for all countries benefiting from the recent strong run.
There are areas overseas which are in much better shape than the United States, according to the “Gloom, Boom and Doomer.”
“China looks quite attractive,” said Faber. “For the next three months, money can flow into China. The economy, surprisingly, has begun to do quite well. We see that in retail in Hong Kong. We see that in the hotel industry, and we see that in the demand for commodities.”
According to Faber, commodities such as copper and gold could also give investors solid profits this year. Faber advised that investors should invest in resource stocks.
“When you look at Trump and his administration, and the way the budget is, I think further money printing down the line is inevitable,” Faber reasoned, which is a policy that could send commodities even higher.
Back in August 2016, Faber warned of stock market doom and a 50% collapse [link].