For several months, economist Ted Bauman has been calling for the possibility of a stock market crash. Although many traders on Wall Street would disagree about the stock market crashing, there is a growing consensus among investors that the stock market is extremely overvalued and the bull market may not last much longer. Ted Bauman traveled to South Africa when he was a young adult. He earned his economics and history degrees at the University of Cape Town. His written work has been published in respected journals all over the world. Today, he is an editor for Banyan Hill Publishing and provides his subscribers with three newsletters to help them achieve their financial goals. He lists several macroeconomic factors that could eventually cause the stock market to crash.
Ted Bauman feels that US stocks are more overvalued now than at any other time in history and will eventually return to their fair value. He uses a tool called the CAPE ratio for measuring the overall value of the stock market. According to this ratio, the US stock market is more overvalued now than at any other time in history. Once more investors come to this conclusion, they will begin to sell stocks at a fast pace until the market returns to fair value. The average historical reading for the CAPE ratio is seventeen and the current reading is thirty-two. This means that stock prices would have to decline by almost fifty percent to return to historical averages.
A trade war between China and the US is another catalyst that Ted Bauman feels could cause the bull market in US stocks to end. Many respected economists feel that if the trade war does not end soon, the entire world will be thrust into a recession. Mr. Bauman has pointed out that Chyna has done little so far to retaliate against the Trump Administration, except imposing its own tariffs. China could punish US multinational companies that rely on business in China. Many of these corporations would lose substantial revenues, eventually resulting in lower profits. Many of these corporations are traded on major US stock exchanges and their share prices would eventually fall as a result of lower profits.