The Federal Reserve has inflated an asset bubble and that’s going to damp market returns, perma-bear Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC Tuesday.
Faber’s remarks follow downbeat assessments from the likes of former Pimco co-chief executive Mohamed El-Erian and Nobel economics laureate Robert Shiller, who have recently spoken on the increasing odds of a US recession and frothiness in stock markets, respectively.
“Say you’re a young person and you’re just starting to work. So take me in the 1970s. In the U.S., with 20 hours of work, I could buy the S&P 500. Now you need more than 90 hours of work to buy the S&P 500 if you’re young, with a medium income,” Faber told CNBC in an interview.
“The Fed has basically created with their colleagues in Japan and at the European Central Bank (ECB) and the Bank of England (BOE), they’ve created a colossal asset bubble. And the returns going forward will be disappointing.”
Global central banks have created easy liquidity in markets via zero interest rate policies, and sometimes negative-rate policies, as well as through asset purchases. That’s driven up prices across a range of assets.