The Stock Market Bubble!
I would definitely
recommend transferring at least 20% of 401-k assets into a money market fund.
Sometimes it’s called something like, “Capital preservation fund.” The
fundamentals of the economy do not support what has been happening in the
market, so it’s overdue for a major correction especially since interest rates
are only going to rise going forward. The Fed Funds rate has been at its lowest
rate ever these past few years, so this has helped create a tremendous asset
bubble in both stocks and real estate. If the country ran into another
recession, the weapon of being able to lower interest rates can’t be used
because it has already been exhausted. Also, Trump’s talk of creating a $1
trillion stimulus is not feasible right now since the unemployment rate is
already below 5%. If we did this stimulus now, it would help boost inflation
since competition for workers would create an uphill race in wages. The purpose
of a stimulus is to stimulate the economy when there is a high level of
unemployment. Also, the next recession we would go through would be made worse
by this stimulus because we would then not be able to use this stimulus as a
weapon to battle a future recession because it would already be exhausted. We
also have to factor in the fact that China is experiencing its slowest growth
rate in over 25 years. Also, there’s the little detail of having almost $20
trillion in debt. This debt represents 105 % of our GDP which is the highest
its ever been. People have to realize the party ended in the financial crisis
and now the bill is due.
