The U.S stock market has been powering high, hitting new milestones with each passing day. On a normal occasion, the same would signal a booming U.S economy. However, that appears not to be the case this time around, owing to the COVID-19 pandemic. Unemployment rates have surged to record highs with key sectors of the economy struggling a great deal. Amid the disparity, it begs the question, is a market crash on the horizon?
Buffett Gold Bet
The investment moves that Warren Buffett has made in the recent past suggest he is well aware the U.S economy is not doing well and that the stock market might be inflated. Buffett has been tweaking his investment portfolio at Berkshire Hathaway amid growing concerns about the U.S economy’s health.
The Chief of Berkshire Hathaway has already taken some stakes in Barrick Gold despite taking a swipe at gold investments in the past. Gold is often seen as a safe-haven in times of crisis. Likewise, it appears the billionaire investor is wary of the future. The ditching of entire stock holdings in an investment bank and the airline industry paint a clear picture of an investor wary of the Future.
Economics have already warned that the stock market should never be used to affirm the state of the broader economy. While the U.S stock market has risen to all-time highs, so have unemployment levels with millions of people left jobless. Millions are currently clinging to unemployment benefits as well as stimulus packages to stay afloat. Canada’s economy also remains at a precarious position despite recouping 50% of jobs lost in the aftermath of COVID-19.
Struggling U.S Economy
Buffet investment thesis affirms a new reality. Expensive stimulus packages are the key drivers of sentiments in the stock market and not fundamentals. The fact that the Federal Reserve will have to keep supporting the economy raises concerns as to how long it will continue to do so.
The slashing of interest rates to record lows, as well as the pumping of trillion dollars to the economy, has done little to revitalize the economy. Economic activity has slowed significantly ever since the country reopened. Likewise, it does not surprise that Buffett remains cautious when it comes to investments in the stock market.
