I have been expecting a major market correction, and possibly even a crash, for some time now; that is, ever since November 5th, 2024. It should be blindingly obvious to anyone with half a functioning brain that Trump and his MAGA cronies are going to steer the US into a major crisis or be faced with a polycrisis that overwhelms the US capability to respond, and the markets are finally going to notice.
I'm not the only one who thinks this. See, for example, Paul Krugman's newsletter today, titled Why Aren't the Markets Freaking Out? Here are a couple of relevant quotes.
My read of economic and financial history is that market pricing almost never takes into account the possibility of huge, disruptive events, even when the strong possibility of such events should be obvious. The usual pattern, instead, is one of market complacency until the last possible moment. That is, markets act as if everything is normal until it’s blindingly obvious that it isn’t.
Later:
So if the conventional wisdom is that economic conditions will remain more or less normal despite highly abnormal policy, markets will remain calm until the illusion of normality becomes unsustainable. At that point market prices may “change violently.” The current technical term for this phenomenon is a “Wile E. Coyote moment” — the moment when the cartoon character, having run several steps off the edge of a cliff, looks down and realizes that there’s nothing supporting him. Only then, according to the laws of cartoon physics, does he fall.
You might ask why smart investors with long time horizons don’t foresee Wile E. Coyote moments and get very rich in the process. Some do. But for reasons that would take another long post to explain — maybe a primer one of these days — there never seem to be enough such investors to shake market complacency, no matter how unwarranted. It’s one thing to short a stock, but to short the entire market is a completely different beast.
And yes, he does provide receipts to back up his assertions.
I think I will forward this column to my financial advisor.