A Market Crash Is Coming: 1 Growth Stock to Buy When It Happens
The Federal Reserve has taken steps to stimulate the economy throughout the pandemic. For instance, interest rates are near historic lows, and the Fed continues to buy $120 billion in mortgage-backed securities and Treasury bonds each month. The goal behind these policies is to suppress the cost of borrowing while injecting cash into the economy.
However, the economy is starting to look a little overheated. Last week, the U.S. Labor Department reported a 5.4% jump in the consumer price index (CPI) over the past 12 months, marking the biggest increase in over a decade. This has many investors concerned, because the CPI is used to gauge inflation, and in the past, rising inflation has often coincided with a market crash.
More alarmingly, the Shiller P/E ratio -- which compares the price of the S&P 500 to the average inflation-adjusted earnings over the previous 10 years -- currently sits at 38. But prior to this time, the Shiller P/E has only exceeded 35 once in history: right before the dot-com bubble popped and the market crashed in 2000.
Source Fool.com
