The coming Reversion to the Mean of Inflated Economic Sectors and Assets Prices

Monthly Market Commentary: August 1, 2018

If in an economic system prices in one or several sectors increase over an extended period of time far more than the overall price level, a reversion to the mean will sooner or later take place. The adjustment in prices can take place in two different ways. Prices in the inflated sector can stagnate for a while or increase more slowly than the overall price level.

Another possibility which is more likely is that grossly inflated sectors and assets revert to the mean by crashing altogether.

I believe that stock markets around the world are at an important crossroad: Growth (represented by the NASDAQ 100) is out and Value (real estate, REITs, Telecoms, food, consumer staples, financials, and energy (as represented by the Russell 1000 Value ETF – IWD) is beginning to outperform.

Finally, may I suggest my readers to remember Larry Kudlow's recent words of wisdom:
“This is a boom that will be sustainable. Frankly, as far as the eye can see. This is no one shot, ever.”
Larry Kudlow
(July 27, 2018)


With kind regards   
Yours sincerely   
Marc Faber 

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