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Institutional investor Richard Bernstein, who has worked on Wall Street for decades, has issued a warning to investors. He is very critical of several popular assets ranging from Big Tech to Bitcoin and from Reddits meme stocks to long-term bonds.
–Why is this important?
Stock market expert Bernstein is one of 57 analysts inducted into ‘s “Hall of Fame” Institutional Investor. When such a person speaks, the markets listen attentively. He believes it is time for investors in the most popular stocks of the moment to start diversifying their portfolios. Bernstein sees many dark clouds on the horizon, but also doesn’t think the storm will last very long. To illustrate how he sees the market scrambling again, he uses a metaphor… (see below)“We may be in the biggest bubble of my career,” Bernstein, the CEO and CIO of Richard Bernstein Advisors, told CNBC on Monday. His warning implies that the magnitude is bigger than the dot-com and housing bubbles.
‘Kryptonite for this bubble’
“From the Fed (US central bank, ed.) has distorted the long end of the yield curve in such a way that we see a very natural reaction in long-dated assets, which then take on a life of its own,” Bernstein said. “Anyone who is in these long-term assets must be firmly convinced that long-term interest rates are not going to rise, because that is the kryptonite for this bubble.”
Bernstein believes the implosion is even more dangerous than it was in June, when he warned that… Bitcoin a bubble used to be. The cryptocurrency has since recovered, but is still down about 20 percent in the past three months.
Raw materials and energy
“When you get into a bubble, people become very nearsighted. They’re just looking at a very small universe of investments,” he said. “People always say to me, ‘Okay. Well, you’re so smart. When will the bubble burst?’ The answer is that no one knows.”
Bernstein, also credited for his work as a strategic analyst at Merrill Lynch, recommends diversifying into stocks with pricing power in an inflationary environment.
“That would lead you the most to raw materials, to materials, energy, things like that,” he said. “I think it’s really interesting that energy has been in a big bull market for the past six or 12 months and everyone is saying it’s unsustainable. Bitcoin has been in a major bear market and everyone is waiting for it to come back.”
Seesaw
Despite his warning of a bubble of epic proportions, Bernstein is not predicting a total market collapse. He sees the market as a seesaw.
“We are balancing between these long-term assets that are highly overvalued and a bubble versus the rest of the world,” Bernstein said. “Unless liquidity dries up very quickly, which seems unlikely, the likelihood of a major bear market is probably much smaller than people think.”
The stock markets have again recorded record figures in recent weeks.
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