As inflation rose in the United States, following massive stimulus measures issued by the Federal Reserve, investor and financial writer Lyn Alden Schwartzer released a report which shows that “US households now have exposure record shares “. The news comes at a time when many analysts and economists believe the stock markets are in a colossal bubble.
Dow loses 900 points, financial expert Lyn Alden Schwartzer publishes report on US household exposure to equities
Stock markets saw significant carnage on Monday as the Dow Jones Industrial Average lost 900 points in the morning (EDT) or 2.3% as it was the biggest drop in value this year. Likewise, the Nasdaq Composite came very close to losing 1% and the S&P 500 index lost 1.5% on July 19. reports attribute the market downturn to the recent increase in Covid cases around the world and the delta variant.
Meanwhile, Travis Kling, the promoter and leader of crypto at Ikigai Asset Management shared a tweet from financial expert Lyn Alden Schwartzer who said: “US households now have record exposure to equities.” Kling too was talking on the issue in question and pointed out that the Fed could turn it into a national security issue.
“I’ve been saying for over a year now – the SPX hike is a big deal [of] national security for the United States. The Fed has the capacity to do this (for now). What do you think they are going to do? Kling asked.
Schwartzer didn’t just tweet about stocks held by U.S. households, as the investor also posted a blog post on the subject on Seeking Alpha. The financial analyst said that last May, the researcher released a report that highlighted how the United States is currently being fueled by “budget-driven inflation.” In the latest report, the analyst says that “this is what the United States is going through right now.”
“Due to the stimulus effects and rapid growth in the broad money supply,” Schwartzer’s report notes. “Consumers have more money in their pockets to spend, while the production of some supplies and services remains constrained in various ways. This combination results in an increase in prices for all restricted goods and services, until these prices increase enough to reduce demand. “
Schwartzer: “Treasury bills do not follow inflation and therefore lose purchasing power”
Schwartzer further explains that “the effects of budget-driven inflation still occur, with average price increases of 5.39% year-over-year.” Meanwhile, interest rates on bank accounts and T-bills are drastically low.
While showing a chart of the St. Louis Fed’s 3-Month T-Bills, Schwartzer remarks, “If we zoom out, here is the real interest rate on the 3-month long-term T-Bills, that is, the interest rate paid by treasury bills. minus the prevailing consumer price inflation rate. Schwartzer’s analysis adds:
These treasury bills also tend to be a pretty good indicator of bank interest. Basically anytime that blue area is less than zero it means that the interest rates on bank accounts and short-term treasury bills are not keeping up with inflation and therefore losing purchasing power.
In addition to US household equity allocations, Schwartzer notes that a big risk the markets are currently facing is “this new wave of cases of the delta-variant virus.” The economist also points out that this is “the first time that the US stock market has reached 200% of the size of US GDP.”
The investor is bullish on the energy sector but sees the Covid cases and “government foreclosure responses as a short-term risk factor for a correction in the industry.” This means that the energy market could stop inflating for a short time, says Schwartzer. While Schwartzer is bullish on the energy sector, the investor also mentioned diversification into Bitcoin (BTC) as well in a recent video published by the Financial Monster Youtube channel.
In addition to tax-induced inflation, the number of US homes awarding shares is also driven by rising prices and speculative investment, the Schwartzer report details. “US household allocations to equities currently represent a record percentage of total US household assets, resulting from a combination of high valuations and speculation.”
What do you think of Lyn Alden Schwartzer’s valuation and the current record US household exposure to equities? Let us know what you think of this topic in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons, St. Louis Fed, FRED,
Warning: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, nor a recommendation or endorsement of any product, service or business. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, good or service mentioned in this article.