Michael Pento: Buy & Hold Investors To Get Wiped Out

The era of passive investing is over

[This interview was accidentally emailed out early. Resending it now that the video is live.]

Stocks are on track to end 2024 on a high note.

The S&P is up nearly 30% so far, having hit new record highs all throughout the year.

Will the party continue into the New Year?

Or will 2025 be a less enjoyable one for investors?

To find out, we're fortunate today to talk with money manager Michael Pento, president of Pento Portfolio Strategies.

He maintains a 20-point model that guides his portfolio allocation. And today we'll hear what it's advising him to do right now.

The punchline?

Stocks have the momentum to run higher here in the short term. But when the rally peters out, they will be dangerously overvalued.

To hear how Michael is positioning his clients for what lies ahead, click here or on the video below:

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Adam’s Notes: Michael Pento (recorded 12.2.24)

EXECUTIVE SUMMARY:

• The S&P 500 has surged approximately 27% in 2024, achieving record highs throughout the year. Despite this strong performance, Michael warns that this rally is driven by speculative confidence rather than sustainable fundamentals. Concerns about 2025 include shrinking liquidity and corporate debt refinancing challenges, which could lead to increased market volatility and investor disappointment.

• Michael describes himself as cautiously bullish, guided by his 20-point model, which places the economy in "Sector 4: Reflation." This phase is marked by accelerating growth and inflation, prompting a tactical investment approach. While his portfolio reflects optimism, with substantial equity exposure, he also holds 50% in bonds and a small short position in high-yield debt to hedge against downside risks.

• The U.S. economy faces severe structural challenges, including a debt-to-GDP ratio of 260%, far higher than the 132% seen during Reagan’s era. Equity valuations are at unprecedented levels, with total market cap as a percentage of GDP at 207%, compared to 40% in 1981. Additionally, the S&P 500's price-to-sales ratio is over 3, further underscoring extreme market overvaluation.

• In the next recession, Michael expects a stock market declines that will exceed