With so much competing financial news out there, investors may have a hard time deciding for themselves whether markets are going to continue to grow, or whether they’re going to completely collapse. Certainly the economy is slowing, industrial production is down, and tariffs continue to hurt American farmers and industry. But stock markets continue to set record highs, oblivious to all of that and acting as though the sky is the limit. So which is it: will we face a permabull market or a devastating crash?
In reality the latter is more likely than the former. There’s all sorts of data indicating that a recession is on the way, from falling heavy truck orders to last year’s inverted yield curve to the recent drama in repo markets. But there’s another chart that stands out. That’s the percentage of US IPOs that are losing money. At over 75%, that ratio is higher than at any time since the peak of the dotcom bubble, and we all know how badly that ended.
From WeWork to Uber to Lyft, we’re all familiar with overvalued tech IPOs by now. But while they’re getting the headlines, it’s actually healthcare stocks that are the big losers, with investors chasing biotech stocks in search of major growth opportunities. With so much money flooding stock markets, and smaller fish constantly getting scooped up by larger, well-established firms, investors are bullish. But the facts don’t match up to the hype. IPOs have largely been losers recently, as their poor business fundamentals expose a market that trades on expectations rather than reality.
Ultimately this is just one more warning sign among many that a market downturn is imminent. The Federal Reserve is doing everything it can to keep a stock market collapse from occurring, pumping $400 billion into markets over the past four months. But it can’t keep markets supported forever. Eventually the money printing will stop, and investors will have to judge for themselves whether they want to keep pouring their money into increasingly overvalued stocks, or if they want to protect their wealth against a stock market crash by investing in gold.
This article was originally posted on Goldco.
