Analyst for financial planning firm Clarity Financial Jesse Colombo warns that the recent gains in household wealth may be artificially inflated by the Federal Reserve, spelling trouble for the economy and stock market.
Colombo explains that roaring growth in household wealth since the Great Recession is a "sham, a farce and a gigantic lie that is tricking everyone into believing that happy days are here again even though the engines that are driving it are bubbles that are going to burst and cause a crisis that will be even worse than the 2008 crash." While Colombo is not the only industry expert to make the same argument, MarketWatch reports that his analysis is "potent" in its illustrative data.
Wealth that gallops past economic growth is a “telltale sign that the boom is artificial and unsustainable, he said. The last two times the share of household-wealth growth exceeded gross domestic product, or GDP, was during the late 1990s dot-com bubble and the mid-2000 housing bubble, he notes. “Both of which ended in tears,” he said. And that means the coming crash could be even more painful, warns Colombo.