Part 11/19:
Warning Signs and Portfolio Strategies
Given this volatile environment, McDonald advocates for caution and strategic asset diversification. He emphasizes the importance of raising cash, especially amid rising recession risks and deteriorating credit conditions. He warns that passive investment funds—especially as they comprise an ever-increasing share of market capitalization—pose systemic risks. As passive funds dominate, stock prices can become inflated and disconnected from fundamentals, increasing the potential for a sharp correction once market sentiment shifts.