Crushed by Debt
Global stock markets continue to go up almost every day. In the face of this relentless bull market, Chicken Little still believes the financial sky will fall. Real interest rates will continue to rise and (eventually) cause the decline of stocks and other risky assets.
Three reasons to remain Bearish on Stocks.
During up days in the stock market, I want to buy stocks and become bullish. AI and other technologies are ripping through the economy and this is going to make us all rich. The bull market appears, and may be, caused by a rational, forward-looking understanding of technology.
Notwithstanding tremendous technological change, I have three primary reasons for remaining bearish. They are rising interest rates, persistent government deficits, and public love of stocks.
Bearish Reason #1: Rising Interest rates
Interest rates around the world are at, or close to, the highest rates in decades. Furthermore, the rise in rates has been rapid and historic. In Germany, the 10-year government Bund had a negative (!) rate in late 2022. Now the rate is above 3% and rising rapidly.
Higher rates should translate to lower asset prices. So far this has not happened, but it can at any moment. Look for further spikes in global rates.
Bearish Reason #2: Government Deficits
Spending is being stimulated by historically large government deficits. Consider that total US corporate profits annualized at the highest level in history in Q4 2025 equaled $3.79 Trillion. During the same period, the US federal deficit was $1.8 trillion.
What would corporate profits if the US government were forced to stop running deficits (or even run a surplus to pay back some of the previous debt)? The answer is that profits would be much, much lower without the Government sending money to people in historic amounts.
Bearish Reason #3: Public loves stocks.
In 1980, when the Dow Jones Industrial average was at 1,000, 1/50 of its current level, Americans has about 15% of their wealth invested in the stock market. Today, the figure is 52%.
In 1980, when the Dow Jones Industrial average was at 1,000, 1/50 of its current level, Americans has about 15% of their wealth invested in the stock market. Today, the figure is 52%.
Over the decades, investors tend to be out of sync with opportunity. In short, the more that Americans love stocks, the lower the prospects for continued stock market gains.
Summary: Three reasons for my bearish view.
First, global interest rates have risen dramatically in the last few years, and rates are very likely to go higher. Second, the economy is being stimulated by massive government deficits. Third, the public always buys at tops and sells at bottoms. The public loves stocks and that is a bad omen.
April 2026 Portfolio Performance
In April 2026, the Dow Jones Industrial Average gained 7.26%, while the Chicken Little Portfolio gained 0.28%. Year to date, Chicken Little has returned 0.99% vs. a gain of 3.76% for the Dow.
April 2026 was a great month for speculative asset classes. Gold and long-term treasuries were modest losers, while stocks around the world and crypto rallied.
April 2026 portfolio position
Chicken Little Portfolio remains 100% in cash. It is boring to have no position. I am bearish so cannot buy risky assets. I also don't try to call turns so my discipline doesn't allow shorting until the bear market is in progress.
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