In 1929, a businessman and economist by the name of Jerome Levy didn’t like what he saw in his analysis of corporate profits. He sold his stocks before the October crash.
The U.S. and many advanced economies still have balance-sheet excesses exposing them to renewed financial crisis. There is limited-room for policy makers to reverse any slump, and low inflation risks tipping into deflation in many parts of the world.
American companies are getting a historically large proportion of earnings from abroad and households are vulnerable to any bear market because their ratio of stocks to disposable income is higher than at any point aside from the start of this century.
Even if a slump is avoided, the Federal Reserve System(‘Fed’) will keep interest-rates near zero until the next decade.
Without first strengthening substantially, we think it highly unlikely that global financial stability will hold together long enough for the Fed to signal and execute a rate increase. – David Levy