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Investors should be 'terrified' about Dow 25,000, analyst says

CNBC logo CNBC 1/5/2018 Sam Meredith


Wall Street's eye-popping gains should be of great concern to global investors, an analyst told CNBC on Friday.

The Dow Jones Industrial Average broke above 25,000 for the first time on Thursday, following the release of stronger-than-expected jobs data. It was the fastest 1,000-point move in the Dow's history after the 30-stock index broke above 24,000 on November 30 — just 35 calendar days before reaching 25,000.

"We're really terrified," Paul Gambles, managing partner at MBMG Group, told CNBC.

When asked why he believed traders should avoid investing in stocks given the so-called "Goldilocks" global growth conditions, Gambles said: "In the first three versions of the Goldilocks story, Goldilocks actually died horribly and we think that could well happen again (to stocks)."

Gambles said that collective global growth at the level seen through 2017 was the GDP (gross domestic product) equivalent to a "blow-off top." He added similar levels of concerted worldwide growth were seen during previous financial crises and therefore the current risk to investors was "exponential".

Trump: 'New number is 30,000'

On Thursday, the Dow increased 152 points to 25,075, while the broader S&P 500 and tech-heavy Nasdaq also hit milestones.

The U.S. private sector added 250,000 jobs in December, ADP and Moody's Analytics reported before the opening bell Thursday. Economists polled by Reuters expected a gain of 190,000.

In 2017, prices were supported by a rebound in global economic growth and renewed investor optimism that looming corporate tax cuts would result in bigger dividends and share buybacks. A low interest rate environment was also believed to make stocks a relatively attractive investment.

a group of people standing in front of a crowd© Provided by CNBC

President Donald Trump sought to take credit for the Dow's record-breaking rise above 25,000 on Thursday. He told reporters: "I guess our new number is 30,000… There were those that said we wouldn't break 25,000 by the end of the eighth year (of my administration), and we're in the 11th month."

Trump has touted the market's surge throughout his presidency, unlike his predecessors. Since his inauguration on January 20, Trump has tweeted about the stock market more than 50 times.

On Thursday, he tweeted: "Dow just crashes through 25,000. Congrats! Big cuts in unnecessary regulations continuing."

— CNBC's Fred Imbert contributed to this report.


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