Skip to content

Is now the time to sell? Experts say Wall Street is on a bubble, here's why

Free World Class Education
FREE Catholic Classes

By Marshall Connolly (CALIFORNIA NETWORK)
9/19/2017 (1 year ago)
Catholic Online (

Federal Reserve not expected to raise rates.

Is now the time to sell on Wall Street? Stocks are on a bubble, according to multiple analysis and expert opinions. Fundamental market forces no longer justify the prices people are paying for stocks. People are buying stocks because interest rates are too low to justify putting their money elsewhere.

Stocks appear to be on a bubble according to many experts.

Stocks appear to be on a bubble according to many experts.


LOS ANGELES, CA (California Network) -- Smart investors put their money where it will generate the greatest returns over its period of investment. Until the Great Recession, many people simply saved money in banks, earning small, but safe returns on their money year after year.

Then, the Great Recession hit and to stimulate the economy the Federal Reserve slashed interest rates down to virtually nothing. Now savers cannot generate returns by simply saving money. Many people, dependent these returns for their retirement, have moved money into the stock market to rebuild their retirement accounts. However, this added money has caused the prices of stocks to inflate well above the values they ought to have.

This is a bubble, and several major banks, and most recently, hedge fund manager, Julian Robertson, have warned the bubble could burst. Deutsche Bank also warned today that asset prices have reached a record high. The bank issued an ominous warning: We have been more expensive but we are approaching the peaks of 2000 and 2007 and are in line with the most stretched valuations from the 1930s on this metric and higher than the 1929 crash point.

Deutsche Bank added they did not yet see a "trigger" that could set off a correction, they still emphasized the risk for a "sudden correction."

In plain English, this means not today, but soon, the bubble is going to burst.

The cure is to raise interest rates. Higher interest rates will cause some people to sell their stocks and transfer the money to savings. The market will go into decline, but it could be a slow, controlled decline that does not wipe out people's assets.

While the rates cannot be raised too quickly, they must be raised to take pressure off the stock market before the bubble bursts. If they are not raised at all, then the pressure will continue to build.

Sooner or later, people will realize their stocks are more like tulips than actual assets, and the values will plunge overnight as others refuse to buy what they are holding.

This would be catastrophic for people who plan to retire in the near term.

The chaos on Wall Street would also result in firm closings, lawsuits, and other problems that would impact the American people directly. Millions of jobs would be lost as the nation plunges into another recession.

With Trump in office, Republicans and conservatives could be blamed for the crisis, and the political left could gain enough momentum to sweep into power. What happens after that is anybody's guess.

The Fed meets tomorrow, Sept. 20, but a rate hike is unlikely. Economic growth is high, and official unemployment is low, so they should raise the rates to cool the economy down to a sustainable level. Low interest rates also means low prices, and low prices means businesses have trouble raising wages and investing in future growth. For a business, it doesn't make sense to buy new equipment or hire more people if the returns on the investment will remain low.

On the other hand, the Federal Reserve knows that a rate hike will hurt the working class which is now buried in debt and cannot pay higher interest rates on things like credit debt, houses and cars.

Ultimately, the Federal Reserve has painted itself into a virtual corner by trying to keep rates low which helps the working class, and incentivizes people to move money from savings to the stock market. But now a rate hike is critical to saving the economy, in spite of the fact it will result in a contraction on Wall Street. A contraction, or a correction, is much better than a crash.

Unfortunately, increased rates also means it will make life harder for the working class, with some defaulting on credit debt and mortgages. If enough people default, it can cause problems in the credit markets which can also have a ripple effect on the greater economy.

A slow, but steady increase in rates is the only way out of this corner. But so far, there is no signal from the fed this is in the plans, and the longer we delay, the more likely the Wall Street bubble will burst, and bring the market down hard on all Americans.


More Business & Economics

Making a Difference: Catholic social teaching's message to the national budget

Image of All people have a right to participate in the economic life of society.

Thirty plus years ago, the U.S. Catholic bishops wrote a very challenging pastoral letter titled "Economic Justice for All." In their ... continue reading

Recession looms, what should we do? Watch

Image of Knowing a recession is coming will allow us to prepare.

For the past 60 years, the Federal Reserve's yield curve has predicted recessions. Now, as the yield curve shows signs of inverting again, ... continue reading

Disaster looming? Market flashes warning, worst April since Great Depression Watch

Image of The stock market is in decline. Is recession looming?

Markets have suffered their worst April start since the Great Depression, led by Amazon which lost 5.21 percent of its value in one day ... continue reading

Stock market tumbles, is a recession on the way? Watch

Image of The stock market took a tumble yesterday but may recover today. Nobody is certain of what's next.

Global markets have dropped for the past few days, and just this morning have rebounded. It remains to be seen if the recovery is ... continue reading

Is free money a Christian solution to economic problems? Watch

Image of Is there a Christian solution to our economic problems?

The world is richer and more productive than ever before in history. Yet, income inequality is growing the poverty is on the rise. Middle ... continue reading

Never Miss any Updates!

Stay up to date with the latest news, information, and special offers.

Deacon Keith Fournier Hi readers, it seems you use Catholic Online a lot; that's great! It's a little awkward to ask, but we need your help. If you have already donated, we sincerely thank you. We're not salespeople, but we depend on donations averaging $14.76 and fewer than 1% of readers give. If you donate just $5.00, the price of your coffee, Catholic Online School could keep thriving. Thank you. Help Now >

Learn about Catholic world

Catholic Online
Inform - Inspire - Ignite

Catholic Online Saints
Your saints explained

Catholic Online Prayers
Prayers for every need

Catholic Online Bible
Complete bible online

Catholic Online News
Your news Catholic eye

Daily Reading
Today's bible reading

Lent / Easter
Death & resurrection of Jesus

Advent / Christmas
Birth of Jesus

Rest of Catholic Online
All Catholic world we offer

Products and services we offer

Catholic Online Shopping
Catholic medals, gifts & books

Advertise on Catholic Online
Your ads on

Catholic Online Email
Email with Catholic feel

Learn the Catholic way

Catholic Online School
Free Catholic education for all

Student Classes
K-12 & Adult Education Classes

Support Free Education
Tax deductible support Free education

Connect with us online

Catholic Online on Facebook
Catholic social network

Catholic Online on Twitter
Catholic Tweets

Catholic Online on YouTube
Enjoy our videos

Catholic Online on Instagram
Shared Catholic moments

Catholic Online on Pinterest
Catholic ideas style inspiration

Catholic Online Logo

Copyright 2019 Catholic Online. All materials contained on this site, whether written, audible or visual are the exclusive property of Catholic Online and are protected under U.S. and International copyright laws, © Copyright 2019 Catholic Online. Any unauthorized use, without prior written consent of Catholic Online is strictly forbidden and prohibited.

Catholic Online is a Project of Your Catholic Voice Foundation, a Not-for-Profit Corporation. Your Catholic Voice Foundation has been granted a recognition of tax exemption under Section 501(c)(3) of the Internal Revenue Code. Federal Tax Identification Number: 81-0596847. Your gift is tax-deductible as allowed by law.