Although the inflation rate in the United States has risen, after the Fed’s large-scale stimulus measures, investor and financial writer Lyn Alden Schwartzer published a report showing that “American households now have record exposure to stocks. High.” When the news was released, many analysts and economists believed that the stock market was in a huge bubble.
The Dow plunged by 900 points, financial expert Lyn Alden Schwartzer released a report on U.S. household equity exposure
As the Dow Jones Industrial Average (EDT) fell 900 points or 2.3% in the morning, this was the biggest drop this year. Similarly, the Nasdaq Composite Index fell almost 1% on July 19, and the S&P 500 Index fell 1.5%. Mainstream media reports attribute the market downturn to the recent surge in Covid cases worldwide and delta variants.
At the same time, Travis Kling, a cryptocurrency supporter and executive at Ikigai Asset Management, shared a tweet from financial expert Lyn Alden Schwartzer, stating: “American households are now at a record high for exposure to stocks.” Kling also shared a tweet from financial expert Lyn Alden Schwartzer. spoke On the issue at hand, and emphasized that the Fed may turn it into a national security issue.
“I have been saying for more than a year-SPX rise is a problem [of] The national security of the United States. The Fed is capable of achieving this goal (for now). What do you think they will do? “Klin asked.
Schwartzer not only tweeted about stocks owned by American households, because the investor also posted a blog post on the subject on Seeking Alpha. The financial analyst said that in May last year, the researcher published a report highlighting how the United States is currently being driven by “fiscal-driven inflation.” In the latest report, the analyst said, “This is what the United States is currently experiencing.”
“Due to the stimulus effect and the rapid growth of the broad money supply,” Schwartz’s report pointed out. “Consumers have more money to spend in their pockets, and the production of certain supplies and services is still subject to various restrictions. This combination causes the prices of any goods and services that are restricted to rise until these prices rise enough to suppress demand until.”
Schwartzer: “U.S. Treasuries cannot keep up with inflation, so they are losing purchasing power”
Schwartzer further explained that “the impact of fiscal-driven inflation is still happening, with average prices rising by 5.39% year-on-year.” At the same time, bank account interest rates and T-bills are quite low.
Schwartzer commented when showing the St. Louis Fed’s 3-month Treasury bond chart: “If we shrink, this is the real interest rate of the long-term 3-month Treasury bond, which means the interest rate paid on the Treasury bond minus the current consumer price inflation rate.” Schwartzer The analysis added:
These Treasury bills are often also a good representative of interest on bank accounts. Basically, as long as the blue area is lower than zero, it means that the interest rates of bank accounts and short-term Treasury bonds cannot keep up with inflation and are losing purchasing power.
In addition to the stock allocation of American households, Schwarzer also said that a major risk currently facing the market is “this wave of new delta-variant virus cases.” The economist also emphasized that this is “the first time that the US stock market has reached 200% of the US GDP.”
Investors are optimistic about the energy industry, but regard the Covid case and “government’s response to the lockdown as recent risk factors for the industry’s adjustment.” Schwartzer explained that this means that the energy market may stop expanding in a short period of time. Although Schwarzer is optimistic about the energy industry, the investor also mentioned the diversification of Bitcoin (BTC) in a video recently released by the Youtube channel Financial Monster.
Schwartzer’s report details that, in addition to fiscal-driven inflation, the number of housing allocation stocks in the United States is also driven by price increases and speculative investment. “Due to high valuations and speculation, the allocation of stocks by American households currently accounts for a record high as a percentage of the total assets of American households.”
What do you think of Lyn Alden Schwartzer’s assessment and the current record share exposure of American households? Please tell us your thoughts on this topic in the comments section below.
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