Levy Explains How Stock Market Could Melt Up Through Yearend Despite Worsening Economic Outlook and Falling Company Earnings and Guidance

“Bubble or Nothing” White Paper Reveals the Causes of Investors’ Dilemma: How Long-Term Changes in Economy’s Financial Structure Increased Pressures to Take Greater Risk, Create Asset Bubbles, and Generally Increase Financial Fragility

Mount Kisco, New York, UNITED STATES


MOUNT KISCO, N.Y., Nov. 18, 2019 (GLOBE NEWSWIRE) -- How are equity markets setting records against a backdrop of continually worsening profits, company guidance, and global economic news? According to David A. Levy, chairman of The Jerome Levy Forecasting Center LLC, the answer is that late in this business cycle, the pain of missing an opportunity for capital gains is historically high.

In a recent white paper, Levy detailed how extreme pressure to take risks is not a figment of conjecture or soft analysis; rather, it is the mathematical embodiment of changing parameters in financial calculations throughout the economy. The cause of these changing parameters? Seven decades of private balance sheets growing faster than private income.

Says Levy, “This era’s scarcity of safe yield, paltry rates of operating returns, and slow economic growth—all too familiar problems—are directly tied to the aggregate value of private assets growing progressively larger relative to aggregate private income over many decades and, meanwhile, private debt having risen relative to income.

Levy continues, “So, at times such as the fourth quarter of 2019, investors find it unusually painful to stay on the sidelines when a bullish narrative gains momentum, and the stampede can for a while offset the sobering effects of bad news. . . In this extreme Big Balance Sheet Economy, the pressures to take risks when perceived threats subside—to jump into rallying asset markets and risky debt—are about as great as at any time in U.S. history.”

Levy’s white paper titled Bubble or Nothing: How the Long-Term Swelling of Household and Business Sector Balance Sheets Has Increasingly Forced Lenders, Investors, and Borrowers to Sacrifice Prudence, Financial Rewards, or Both is available to the public for download at https://www.levyforecast.com/bubble-or-nothing/.

David Levy’s discussion of the paper with Joe Weisenthal and Tracy Alloway on Bloomberg’s Odd Lots podcast can be heard at https://www.bloomberg.com/news/audio/2019-10-18/how-private-sector-balance-sheets-changed-recessions-podcast.

About The Jerome Levy Forecasting Center LLC
The Jerome Levy Forecasting Center LLC is an independent economic research and consulting firm that has been specializing in using the macroeconomic Profits Perspective in economic analysis and forecasting for seven decades. The goal of the Levy Forecasting Center is to improve its clients’ business and investment performance by providing them with powerful insights into economic risks and opportunities – insights that are difficult or even impossible to achieve with conventional approaches to macroeconomic analysis. Additional information may be found at www.levyforecast.com.

For press inquiries contact Robert King at The Jerome Levy Forecasting Center – rking@levyforecast.com.