Marc Faber Economic Outlook 2015: Global Stocks and Gold

Marc Faber Economic OutlookMarc Faber predictions call for higher interest rates. However, the contrarian investor, and founder of the Gloom Boom Doom report, remains bullish on select stock indices and real assets like gold.

Faber’s economic outlook may surprise many. As a long-time contrarian, Faber often sees what the majority do not. On the surface, contrarian means moving against the herd, which in this case means buying when others do not. But, there is more to it. Faber remains an investor. He is in the business of consistently making money, with his outlook on asset classes remaining diverse.

Marc Faber Predictions: U.S. Stocks

Overall, Faber remains bullish on U.S. equities, relative to fixed-income assets like bonds. The simple reason for this is that many European government bonds, including Switzerland, Germany, and Demark, have negative yields. The story is similar around the globe, with fixed income yielding investors close to nothing. (Source: PIMCO, February 1, 2015.)

A bond with a negative yield, or a negative rate of return, means that an investor who owns that security will lose money each year over the entire life of the bond. Faber does not want to lose money and therefore believes U.S. stocks will outperform government bonds, especially European government debt, over a longer horizon. This can take anywhere from five to 10 years. (Source: The Wall Street Journal, January 31, 2015.)

However, within the S&P 500, some sectors have moved much higher than others. For example, the NASDAQ Biotechnology Index has gained roughly 54% since the start of 2014, while the broader benchmark S&P 500 has only moved up 14%. That’s why Faber believes that for the first time since the 2007 to 2008 period, there are some select shorting opportunities. Faber hinted at the biotech and social media space as richly valued sectors that are prime for price declines. (Source: The Wall Street Journal, January 31, 2015.)

Nasdaq Composite Chart

‘NASDAQ Composite Index– April 1996-Present,’

Chart courtesy of

Marc Faber Predictions: International Stocks

Faber sees investment opportunity outside the U.S. given that the S&P 500 has already returned 211% since the 2009 lows. However, he warns in an interview that, “Many [global] markets are not terribly expensive, but not cheap either.” Investors should tread lightly, but Faber’s long-term favorite remains emerging market stocks. (Source: The Wall Street Journal, January 31, 2015.)

Despite strong gross domestic product (GDP) projections for emerging markets and improvements out of Europe, the MSCI EAFE Index (below in green), which tracks Europe, Australasia, and the Far East, actually underperformed in U.S. dollar terms. The global index declined 4.5% in 2014. So, global indices outside the U.S. declined despite positive local currency performance, such as that out of France up 3.6% and Germany up 2.8% in 2014.

U.S. currency-based investors looking to follow Faber’s advice and go global should note that the performance of their portfolio may be limited due to the effects of a strong U.S. dollar.


‘MISCI EAFE Index– April 2005-Present,’

Chart courtesy of

However, some international markets, which Faber maintains a favorable outlook on, continue to grind higher despite a stronger U.S. dollar.

For example, since the move began in earnest during July of 2014, the Shanghai Stock Exchange Composite is up 120%. Faber told reporters that he has been in the mainland Chinese share market since late 2014. (Source: CNBC, March 18, 2015.)

Faber’s China investment thesis hinged on a disconnect between economic growth and the performance of the stock market. Up to late 2014, the Chinese market, for which the Shanghai Composite is a proxy, had underperformed the U.S. benchmarks despite the superior economic growth out of China. From the low of October 2008 to the start of July 2014, the Shanghai Stock Exchange Composite Index only returned 20%. However, the U.S. equivalent, the S&P 500, returned roughly 90% in the same time period.

Another international favorite of Faber is India. He believes the Indian economy will continue to outperform the rest of the globe. According to the International Monetary Fund (IMF), India is set to expand 7.5% in 2015 and 2016. While the India stock market (the SENSEX) rose 24% in 2014, Faber believes it can climb another 15% this year. However, Faber’s India prediction is yet to play out with the SENSEX declining 3% year-to-date. (Source: International Monetary Fund web site, last accessed April 28, 2015.)

Marc Faber Predictions: Gold Forecast 2015

Another asset class that Faber is bullish on is gold. Since its early November 2014 bottom, gold has inched four percent higher. We’ve seen higher gold prices, despite an 11% rally in the U.S. dollar, during the same time frame. Gold’s recent performance isn’t bad either; in fact, it’s noteworthy.

US Dollar Chart

‘US Dollar Index vs. Gold Spot Price – July 2011-Present,’

Chart courtesy of

According to Faber, gold is the only way to short central banks. That is precisely why he is long for the shiny stuff. His negative outlook on central banks stems from an opinion that the Federal Reserve has been printing money and creating asset bubbles since the late 1990s. On top of that, Marc Faber believes the Federal Reserve is not the only central bank to print money excessively.

The Bank of Japan currently purchases $672 billion annually of Japanese government bonds in an attempt to lower interest rates. This is on top of the bank’s purchases of $25.0 billion annually in Japanese real estate investment trusts. Faber believes these excessive measures to raise inflation, in a stagnant Japanese economy, will fail; thereby causing investors around the world to lose faith in central banks. (Source: Bank of Japan, October 31, 2014.)

To hedge against this outcome, Faber has continued to purchase gold monthly as part of his general asset allocation strategy. Faber warns his readers and fellow investors that while he is long in gold, he owns many other assets such as stocks, bonds, and real estate. (CNBC, March 18, 2015.)

For risk-tolerant investors, Faber suggests looking to gold miners. Mining companies are a leveraged way to play the physical commodity and are only suitable for a buyer willing to take the risk. For example, the Market Vectors Junior Gold Miners ETF (NYSEARCA/GDXJ) has declined 85% since its peak in April of 2011, while the spot price of gold is only down 40%.

Marc Faber Investment Outlook

Faber believes interest rates are too low globally. In the past, this has often led to asset bubbles, whether it was oil price hitting $140.00 in June of 2008, or the NASDAQ composite closing above 5,000 (or 361% above its low in early 1997) during the dot-com bubble of the early 2000s.

To prevent asset bubbles and to return economic forces to normal, Faber welcomes higher interest rates. Higher rates can restore balance in an out-of-sync market addicted to a zero cost of borrowing. This can also send overbought U.S. and international stocks lower—not to mention bonds. In an overbought environment, it will pay to stay contrarian, but also to maintain a diversified portfolio, as does Faber himself.