Bill Fleckenstein: The Market Is In A Dangerous Set-up That Could Get Ugly Quickly

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Sep 9, 2025

Bill Fleckenstein, a veteran money manager and founder of Fleckenstein Capital, shares his insights on the precarious state of the investment market. He highlights the disconnect between soaring asset prices and deteriorating economic signals, emphasizing the risks of passive investing. Fleckenstein discusses the implications of potential Federal Reserve rate cuts, the challenges facing recent graduates in a slowing economy, and the impact of the aging baby boomer demographic on housing markets. His advice centers on strategic planning amid uncertainty.

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INSIGHT

Passive Bid Overrides Fundamentals

Passive ETF and index flows now dominate price discovery and can override fundamentals.
Valuation matters to investors but currently does not drive market direction due to the passive bid.

INSIGHT

Bond Market May Disagree With The Fed

The bond market has been signaling skepticism about Fed easing for about a year.
If Fed cuts cause long rates to rise, we could enter a regime last seen in the 1970s with perverse rate dynamics.

ADVICE

Watch For Evidence Before Acting

Monitor signs of change rather than trying to predict exact timing of a passive bid reversal.
Act when you see clear market evidence that flows and employment are shifting.

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It's a tricky time for investors right now.We're seeing increasing signs the economy is slowing down, but nearly all assets are surging in price right now.Some, like many stocks, are at all--time high valuations levels. Even though the weakening economic data increasingly makes their forward earnings forecasts look unattainable.Bond yields remain elevated and inflation is not yet at the Fed's 2% target -- yet it seems highly likely an interest cut of at least 25 basis points will happen this month.What will win out from here as we head into the end stretch of 2025?Will the momentum and investor exuberance keep driving asset prices higher?Or will they finally start to buckle under the gravity of the underlying data?For answers, we have the great fortune today of turning to veteran money manager Bill Fleckenstein, founder of Fleckenstein capital.#marketbubble #bonds #inflation _____________________________________________ Thoughtful Money LLC is a Registered Investment Advisor Promoter.We produce educational content geared for the individual investor. It’s important to note that this content is NOT investment advice, individual or otherwise, nor should be construed as such.We recommend that most investors, especially if inexperienced, should consider benefiting from the direction and guidance of a qualified financial advisor registered with the U.S. Securities and Exchange Commission (SEC) or state securities regulators who can develop & implement a personalized financial plan based on a customer’s unique goals, needs & risk tolerance.IMPORTANT NOTE: There are risks associated with investing in securities.Investing in stocks, bonds, exchange traded funds, mutual funds, money market funds, and other types of securities involve risk of loss. Loss of principal is possible. Some high risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods.A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.Thoughtful Money and the Thoughtful Money logo are trademarks of Thoughtful Money LLC.Copyright © 2025 Thoughtful Money LLC. All rights reserved.