Billionaire Investors Aren’t the Only Ones Predicting a Stock Market Crash

  • Billionaire investors have warned that the stock market is overvalued.
  • A majority of investors believe the next big market move will be down.
  • A second wave of coronavirus cases and stock overvaluation could cause a market crash.

A few days ago, billionaire investors warned that the U.S. stock market could crash as stocks are overvalued.

Hedge fund manager Stanley Druckenmiller said that risk-reward for equity is the worst he has seen in his career. Markets appear too high with regard to uncertainty and likely bankruptcies looming on the horizon.

Druckenmiller believes that a V-shaped economic recovery is a fantasy. Billionaire investor David Tepper said the stock market is the second most overvalued in history, just behind the dot-com bubble in 1999.

President Donald Trump thinks those billionaires are just trying to manipulate the market. In a tweet, he said to be wary of wealthy investors who use their platform to comment negatively on stocks to profit from a crash.

Source: Twitter

But it turns out billionaire investors are not the only ones who think the market rally will collapse. A majority of investors are becoming more pessimistic about the stock market.

Fewer Investors Expect Stocks to Go Up

In an Evercore ISI survey of 560 investing and corporate clients May 11-13, less than a quarter of participants said they expect the next 10% move in stocks to be higher. Investors are even more bearish than they were when the market hit bottom in March.

Less than 25% of investors believe the next 10% move in stocks will be up. | Source: Bloomberg

The main reason why investors believe the market will crash is the risk of another virus outbreak as countries start to reopen economies.

Investors are afraid that a second coronavirus wave would plunge the world into a deeper recession and put an end to the market rally.

Investors are also concerned about the stock market valuation. Stock prices haven’t been that high relative to earnings since the dot-com bubble.


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