There is no free lunch. Those who have been most risk-exposed during the past 3 years of QE-induced financial mania have garnered the most paper returns, but also stand to lose the most in the mean reversion phase. Worse, even with the extraordinary bounce back in equity prices, the most touted stock market in the world–the S&P 500–has still returned just 4% a year over the 15 years since this secular bear began off reckless valuations in 2000. In other words, stocks have gained less than T-bills while offering heart-stopping risk and volatility. And now that financial markets have achieved the most over-valued levels in human history on many historically reliable metrics, the rational question is, what next?
In today’s under-saved, over-indebted, over-leveraged world, only the foolish or willfully blind are feeling comfortable or confident about financial risk exposure at this point in the cycle. The few people who do have savings amassed at this point, have the most to lose in this environment. See: Even millionaires are living paycheck to paycheck:
One in five respondents with investable assets of $100,000 to $1 million, and 1 in 10 with investable assets of $1 million up to $10 million believe they have too much debt and are living paycheck to paycheck, according to a poll taken by MaritzCX.
Among the 1,044 investors surveyed in November and December, 45% are worried they won’t have enough income to last through retirement. And 30% believe they will have to work during that period of their lives.