-
Indicators are pointing to a serious correction coming for stocks, market strategist Paul Dietrich says.
-
The B. Riley Wealth chief investment strategist says the market is “bizarrely overvalued.”
-
The “smart money,” based on Dietrich is moving money into money.
The stock market looks “bizarrely” overvalued and indicators are pointing to a giant correction on the way in which, based on Paul Dietrich, chief investment strategist of B. Riley Wealth.
Chatting with Yahoo Finance, Dietrich pointed to a handful of indicators available in the market, that are all flashing a collective warning sign for stocks.
Red flags are arising within the price-to-earnings ratio of the S&P 500, and multiples mirror levels seen prior to the dot-com bubble crash.
“Each indicator seems to inform us we’re in a historic, historic bubble,” Dietrich said. “It’s hard to take a look at that and say that we’re not going to see a serious, major correction coming. Now just isn’t the time to be putting recent money available in the market,” he warned.
The largest indicator of a coming correction is “smart money” investors, who’re moving out of the stock market and into safer money equivalents, Dietrich said. He pointed to recent stock sales from billionaires like Jeff Bezos, Warren Buffett, and the Walton family, the heirs to the Walmart empire, as an indication big investors sense the market is poised to correct.
While sales by insiders or big shareholders are sometimes scheduled prematurely, they can be an indication that investors are concerned the market is approaching a peak, Dietrich suggested.
“There’s just no ambiguity here. It’s bizarrely overvalued,” Dietrich said of the stock market. “You are seeing the smart money without delay moving massive amounts into money … It is not that they don’t think of their firms. They do. They understand it’s just completely overvalued and in the event that they sell it now, they should purchase it back cheaper later.”
It’s unclear what could trigger a coming stock correction, Dietrich said, noting that prior crashes, just like the one which preceded the 2008 crisis, were sparked by unpredictable, Black Swan events. A spike in oil prices consequently of geopolitical conflict, or more regional banking troubles stemming from the business real estate sector, could set the downfall for stocks in motion, he speculated.
Dietrich has forged himself amongst probably the most bearish of Wall Street forecasters at a time when most investors are still feeling bullish about stocks and the economy. Previously, he predicted that the stock market could crash as much as 40% if the US encounters a light recession.
Read the unique article on Business Insider