The Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank have rigged an enormous asset bubble that will initiate “disappointing returns” in the stock market, says Marc Faber, contrarian investor and publisher of The Gloom, Boom & Doom Report, on Tuesday.
Faber told CNBC that in the 1970s with just 20 hours of work a young person who just started working could purchase the S&P 500. Today, however, you need more than 90 hours of work to purchase the S&P 500, notes Faber.
The Fed and other central banks are the culprits of this kind of environment.
“The Fed has basically created with their colleagues in Japan and at the European Central Bank (ECB) and the Bank of England (BOE), they’ve created a colossal asset bubble. And the returns going forward will be disappointing,” said Faber. “The composition of an index is that it’s usually capitalization weighted. So one stock that goes up vertically could theoretically drive up an index and 99 percent of the shares don’t make new highs.”
Faber further added that the Wall Street posted big gains on Monday, but out of the roughly 3,000 shares on the New York Stock Exchange just fewer than 100 reached a 12-month high. “The advance is very narrow,” says Faber.
Moreover, he sees bubbles popping up in the art and property markets. “Some markets are still strong, but the bulk is no longer moving up so the advance of asset price inflation has been narrowing significantly,” Faber said.
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