The stock market has taken investors on a wild ride throughout 2018. A market that had featured historically low volatility for the previous two years has seen volatility and all of its nasty effects come roaring back. At the same time, the market was in negative territory for the year as late as the 10th month of the fiscal year, representing a level of underperformance that hasn’t been seen in a decade and possibly signaling the end of the bull market.
But Shervin Pishevar, one of the most prominent venture capitalists in the world today, says that this development is not the slightest bit surprising. In fact, Shervin Pishevar had predicted way back in February that the stock market would ultimately end up lower in 2018 that it had begun. Shervin Pishevar has consistently been sounding the alarms against the Fed’s open market operations and the consequences that such actions have had both on the equity and bond markets. He says that the can-kicking policies of the Federal Reserve have made the current economic situation worse than it would have otherwise been. Investors now face a situation where their current bond portfolios could soon lose massively at the same time that equities plummet.
Stocks are historic overvaluations
Shervin Pishevar says that the stock market has reached a point of historic overvaluation. This has been heavily and directly influenced by the policies of the nation’s central bank. Through driving interest rates and bond yields through the floor, the Fed has encouraged massive levels of corporate stock buybacks.
At the same time, it has forced investors to chase yields wherever they can be found. In this case, investors have piled into equities, driving the prices of the U.S. equity markets through the roof. Pishevar says that this will eventually cause an inevitable correction as bonds begin to rise. But this will spell double trouble for those who currently own both bonds and stocks.
Current bonds, with their extremely low yields, could lose a great deal of value just as equities are also crashing. Pishevar says that this could cause a great deal of pain among investors in the months to come.