It has been a challenging 2026 for most stock markets. Thailand-based Marc Faber, editor and publisher of ‘The Gloom, Boom & Doom Report’, tells Puneet Wadhwa in a telephonic interview that global markets are moving into an environment where investors should not simply own indices or index funds, but should focus on individual stocks. Edited excerpts:
How are global financial markets positioning themselves ahead of the US midterm elections? Is a major correction in US equities on the cards?
I believe that the US market will go down. However, if we look at market performance so far this year, other markets have performed much worse than the US. South Korea and India, for instance, have slipped considerably from their respective peaks.
That apart, the Indian market has also struggled over the past two years. It peaked in September 2024, and although it has moved up and down since then, investors have not really made money. Indonesia, too, has lost heavily year-to-date in dollar terms.
While the meltdown in the US has not happened yet, but I believe it will, because the indices are being driven primarily by highly valued technology stocks whose future earnings are highly questionable.
Also Read
Do you expect this meltdown to materialise over the next 12 months?
I believe we are already in a bear market, although a major bear market does not begin everywhere at the same time. Some US stocks peaked as far back as 2021 or 2022, and I would say the majority have already peaked. However, indices such as the S&P 500 are constructed in a way that allows a handful of stocks to drive the entire index higher, even when most of the other stocks are declining or underperforming. This is precisely what we have seen recently. The market often rises because of 10 or 20 stocks, while the rest either remain stagnant or move lower.
Do you expect most global stock markets to perform poorly over the next year, especially India?
I think the ‘great bull-market’ that began in India in 2003 is over. We are in a bear market for asset prices, not just equities, because interest rates have risen. It is not necessarily that central banks are tightening liquidity; rather, the marketplace itself is tightening liquidity. I believe we are in a bear market in Indian equities.
Foreign investors have been selling Indian equities. Do you expect a turnaround anytime soon?
No. I think foreign investors will reduce their exposure to markets around the world. That is one reason I am reasonably positive about the US dollar. The dollar is a horrible currency, but the alternatives are even worse, in my opinion. Europe, for instance, faces serious challenges. If France is representative of the broader European situation, it is not necessarily a place where investors would want to put their money. What is happening in France could happen elsewhere, including in the US.
How much downside do you see in the Indian stock market?
I do not have a specific percentage in mind because some stocks could decline significantly while others may fall much less. That said, I have been following the bond market closely. Bond prices peaked, and yields reached their lows, in August 2020. Since then, the bond market has been in a downtrend.
US bonds have delivered exceptionally poor returns over the past five years, making this one of the worst periods for the asset class in US history in terms of total returns, although there are some qualifications to that comparison. At current levels, however, US 10-year Treasury bonds yielding around 5 per cent or slightly more look reasonably attractive over the next 12 to 24 months.
Your investment strategy? Any global stock markets you prefer?
It is difficult to say. Some markets may perform poorly overall, but there could still be individual stocks within those markets that deliver good returns. If I am right and interest rates come down somewhat because of a recession in the US, utility stocks should do reasonably well.
High-dividend stocks could also be attractive, although investors must be careful because some companies may cut their dividends.
We are moving into an environment in which investors should not simply own indices or index funds. Instead, they should focus on individual stocks. Overall, I believe investors should reduce their positions in equities and build up their cash holdings.
What about bonds?
For me, the most attractive investment on a risk-adjusted basis is the US 10-year Treasury. I think it could deliver a return of around 10 per cent. You receive a cash flow of about 5 per cent, and I believe that over the next 12 months, the 10-year or 30-year US Treasury could rally by between 5 and 15 per cent.
Which offers the best opportunity — gold, silver, oil or industrial metals from a 12-month perspective?
In my opinion, oil looks attractive. At around $110 a barrel, the price is obviously much higher than it was in the 1970s, when it was around $3, or in the 1980s, when it was around $20. But compared with gold and silver, oil is relatively cheap. The investment community also does not have a large exposure to oil stocks and the energy sector. Given the geopolitical situation, I favour oil. I also own physical gold and continue to buy platinum.
Has the artificial intelligence (AI) trade run its course?
The bubble has just burst. It started, as I mentioned, in South Korea, but the weakness has now spread to semiconductor stocks and, in my opinion, cloud computing companies such as CoreWeave. The correction has further room to run. AI-related stocks and semiconductors are sectors I would avoid. An aggressive trader might even consider shorting these stocks.