For the first time in over 90 years! Legendary investor: US economic expansion will be limited!

Given the drastic market fluctuations in the past month or so, investors may be wondering where the market is heading next. At the end of July, the S&P 500 and Nasdaq indices fell to their lowest levels since the 1920s, only to rebound later. Global markets saw a sharp decline in early August, but rebounded last week.

Amidst this volatility, "Emerging Markets Guru" and legendary American investor Mark Mobius has been closely monitoring an indicator in the United States: the growth of the money supply. He pointed out that the broad money supply in the U.S. (M2) peaked at $21.722 trillion in April 2022, but had fallen to $21.025 trillion by June this year, a decrease of approximately 3.21%.

Mobius said, "This decline is historically significant, as M2 has never experienced such a decline in over 90 years."

In August last year, Goldman Sachs explained that due to changes in U.S. monetary policy, rising interest rates, and the Federal Reserve shrinking its $8 trillion balance sheet, the U.S. money supply experienced its first contraction in 74 years.

Mobius added, "The main concern is that if M2 has been declining since April 2022 and has not kept pace with economic growth, the funds available for driving current economic expansion and the Wall Street bull market may decrease."

In this context, Mobius suggests that now is the time for investors to hold cash reserves to prepare for re-entry into the market and to research companies with specific attributes. He said, "Look for companies with minimal debt, moderate revenue growth, and high return on capital, and be prepared to re-enter the market."

He also recommends holding a 20% cash allocation, "(this approach) makes sense in the current situation."

While Mobius remains optimistic about opportunities in the tech sector, he noted that these stocks have recently "plummeted," and those that have been overhyped are now overvalued. He said, "Companies with weak balance sheets, low or no revenue growth, and high debt will be in trouble."

Mobius mentioned that the semiconductor industry will face "an even more competitive environment"—especially in the high-end chip sector needed by companies like Nvidia.

Semiconductor companies have benefited from the AI push that began early last year. He said, "Companies like TSMC, UMC, and others will still perform well. They will earn more profits, but the competition will be fierce."

He added, "The good news for these companies is that global demand is overall rising, and it will continue to rise with the increasing demand for AI. So I believe the entire industry will develop well in the future."