A senior investment consultant compared the prosperity of the current technology giants with the Internet foam, and predicted that the stock market would plummet in the next six months and the economic recession would come.
Ted Oakley, managing partner and founder of market consulting firm Oxbow Advisors, said on the show, "Everyone is flooding in the same stocks, so this could be a source of future losses. I think the worst part will happen in the next one or two quarters."
"The worst part of any sell-off is always at the end. This means that even the best investors in the market cannot escape the pain of the future," he added.
Oakley, who has worked in the wealth consulting industry for 40 years, pointed out that almost all of the returns of the S&P 500 index this year came from the "tech seven" stocks, including Tesla and Nvidia. He compared the current wave of artificial intelligence to the hype surrounding the internet in the late 1990s and early 21st century. Artificial intelligence is a key driving factor for the rise of technology stocks this year.
He said, "When you enter such a foam and everyone is trapped in the same thing, you know that this will eventually become a problem." He described the hype surrounding just seven stocks as preparation for "disaster".
Oakley emphasized that it is extremely rare for stocks that lead the market higher in one cycle to repeat this feat in subsequent cycles. He also pointed out that the rise in interest rates has pushed up the yield of safer assets such as US treasury bond bonds and cash, and weakened the attractiveness of stocks.
He also pointed out that Berkshire Hathaway, a subsidiary of Warren Buffett, reported a record $157 billion in cash reserves and net sold stocks in the previous quarter, proving that the stock market was overheating.
"This tells me that they have nothing to buy, otherwise they would have bought it long ago," he said. "People need to pay attention to such things."
Oakley said that due to the historical scale of government spending since the pandemic, prices of stocks, houses, and other assets have skyrocketed. The economic recession has not yet arrived, as a large amount of funds are still working through the financial system.
However, the dual blow of inflation and high interest rates has raised the costs of food, fuel, rent, and other necessities for many Americans, and increased their monthly payments for credit cards, car loans, mortgages, and other debts. Therefore, household needs and the broader economy are facing difficulties.
"We see a lot of things going downhill, and we don't agree with the idea that consumers are very strong," he said.