A Double-Dip Recession finally? Why Mark Faber is extremely Bearish on Stocks?

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Mark Faber, a well known name in the world of investing, in his recent television interview changed his stance on stocks. He believes that we could experience another bear market. He also thinks that as when compared to cash and bonds, stocks do not look attractive at present. Markets have been rising steadily for past two years; however, some turbulence has been seen in the past few months. The ongoing debt crisis in US and across Europe is threatening growth in these regions, and there are many other pointers that indicate that the economy might be headed into another recession. Let’s talk about them:-

The situation we are in right now may seem a bit trickier to many as the treasury market clearly indicates that the economy is going through a recession, but on the other hand stocks are trading on the expensive side. Well, there is only one way to look at this situation and that is stocks are in a vulnerable zone. We should not ignore what the bond market is telling us, and stocks will eventually follow suit.

Globally, Politicians are the Culprits behind Current Economic Problems

Politicians are not doing the required job to steer economies out of current problems. What they are trying to do is delay the panic by placing temporary fixes. This is the case in point everywhere, may it be US, Europe or some emerging market.

When focusing on US, with the quantum of economic headwinds it would be wrong to believe that economy will surprise on the upside. The only surprises if any will on the downside and such events will break the confidence of stock investors. I believe we will see companies delivering disappointing numbers in next few quarterly results.

Another Recession making its way

While I was writing this post the Dow closed down over 500 points, and financial news suddenly went too bearish. Few days back many bullish voices were making a case for a bounce back, but just as Mark Faber suggested, the only surprises will be on the downside and stocks are most vulnerable at this point in time.

Faber suggests investment exposure in precious commodities, if any.

Faber also sees China as even bigger threat to global growth than US as china is a major commodity buyer, and commodity prices are not favoring economic stability in countries relying heavily on commodity imports. Above all the rising food inflation crisis is spreading in emerging markets and such a situation can falter any chances of high growth in these nations.

Now the trend in the market has become clearer, it’s the bears who will ride the wave for the time being.

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