Real estate investor, Grant Cardone, issued a warning on May 5th regarding the stock market, posting on X: “WARNING: Stock Market is due for 50% correction taking S&P below 2674. Tens of millions of households will have their retirement & savings destroyed by being invested in stock market at these levels?”
Cardone points to the history of the yield curve, which has been inverted for over 500 days. This scenario has occurred only three times since 1920—in 1929, 1974, and 2009. Following each of these periods, the market experienced declines of more than 50%. He emphasizes the compounded financial threat by suggesting that a 50% loss in retirement accounts, compounded by inflation, could equate to a total loss in purchasing power of 75%.
To mitigate such risks, Cardone recommends transitioning retirement investments from the stock market to real assets that generate monthly cash flow. He mentions that he has assisted thousands in transferring their retirement accounts without penalties to investments backed by tangible assets.
By doing so, individuals can depend on regular income from these assets during retirement rather than depleting the principal.
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Cardone’s concerns are indeed supported by historical data and economic theory. Over the last five decades, there have been seven instances where the yield curve inverted. Historically, these inversions have been followed by a recession within 6 to 24 months, demonstrating the predictive accuracy of this economic indicator. Since 1955, there has been only one occurrence where an inverted yield curve did not lead to a recession, highlighting its reliability as a forecasting tool.
Every U.S. recession during this period was preceded by an inversion of the yield curve between the 10-year Treasury bond yield and the 3-month Treasury bill rate. This relationship suggests that yield curve inversions can indeed signal economic downturns, as higher short-term interest rates relative to long-term rates often reflect investor pessimism about future economic growth.
However, the direct relationship between an inverted yield curve and recessions involves complex factors, including Federal Reserve monetary policy actions and market expectations. When the Fed raises short-term rates, it can lead to an inverted curve if long-term rates do not increase at the same pace, influenced by investors’ expectations for slower economic growth and lower future interest rates.
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Although the predictive power of the yield curve is strong, it’s not infallible. Economic conditions, monetary policies, and market dynamics have evolved, and there are instances where inversions did not lead to recessions or were followed by economic slowdowns without a full recession. This suggests that while an inversion is a significant indicator, it should be one of several factors considered in economic forecasting and investment decision-making.
Investing in real assets like real estate provides several benefits, particularly as a stabilizing force during economic fluctuations. These assets often exhibit low correlation with stock market movements, offering a form of diversification that can shield investors from market volatility.
Cardone’s emphasis on real assets reflects a valid strategy for those seeking to reduce their exposure to stock market risks. His approach underlines the importance of aligning investment choices with personal financial goals and circumstances, suggesting a tailored financial plan that includes tangible assets to secure steady, long-term returns and enhanced financial stability.
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This article ‘Millions Of Households Will Have Their Retirement & Savings Destroyed’ — Grant Cardone Foresees Devastating Stock Market Plunge Of 50% originally appeared on Benzinga.com
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