- David Hunter thinks an 80% stock market crash is coming.
- He warned that rising inflation could cause the Fed to tighten policy sooner than investors expect.
- It would be the biggest drop since 1929.
David Hunter Believes
But that doesn’t mean that Powell and the FOMC won’t end up giving in to higher inflation in the coming months, Hunter says.
Hunter, chief macroeconomic strategist at Contrarian Macro Advisors, who has been in the markets for 48 years, believes that economic meltdown awaits us given the amount of debt and leverage in the economy and markets, and that inflation will continue to rise to six or seven percent before it drops.
He said during a recent interview with the Fed that they will not be able to ignore these inflation levels Freedom and finance YouTube channel, you will have to turn into a hawk in politics. Inflation rose in September For the sixth consecutive month, it was higher than economists’ expectations. The Consumer Price Index, a primary measure of inflation, rose 5.4% year over year. October data will be released on November 10.
He continued, “The problem is fleeting, not in the next six months. The transition can continue during the depression… If we get up to six or seven percent inflation numbers, they won’t be able to arbitrate the interim anymore. They will question themselves.” Whether it’s temporary or whether it’s transient, that means they’re going to have to tighten.”
Hunter doesn’t get into exactly how such a tightening will look for the Fed, whether it will raise interest rates or rein in its asset purchases much more aggressively than the $15 billion per month pace it says will start later in November. The central bank currently buys $120 billion in assets per month.
But he said the repercussions of the drastic measures he believed she would take were nothing to worry about. He believes it will cause stocks to collapse to about 80% in the next three to six months, the biggest drop since 1929.
Meanwhile, Hunter is optimistic. He recently reviewed his near term Standard & Poor’s 500 Price target to 5300 from 5000 and said it could reach 6000 due to excessively bullish investor attitudes. But with inflation reaching unexpected levels, it will all collapse, he said.
“I think we’re on a long trip here,” Hunter said. “Fasten your seat belts, because this is going to be a date in the making in the next three to six months, I think.”
Hunter’s opinions in context
Hunter’s current opinions do not lend themselves to moderation. His near-term target of 5,300 for the S&P 500 is well above Wall Street’s year-end target of 4,825. Chris Harvey from Wells Fargo.
On the flip side, his call for a subsequent 80% crash is also an outside view, even with his expected meltdown. Even the most bearish strategists among the major Wall Street banks see a 20% decline as the worst case scenario.
However, there is at least some level of skepticism on Wall Street about how far stocks could go up. The S&P 500 has risen by an unprecedented 103% over the past year and a half. Ratings, depending on the scale an individual is using, are at or near all-time highs. The following is the current price-to-earnings ratio and the ratio of total market capitalization to GDP, known as Warren Buffett Indicator.
The average year-end price target for the S&P 500 among Wall Street strategists is around 4,600, which is lower than current levels just below 4,700. In the longer term, some strategists warn of poor returns. For example, Savita Subramanian of Bank of America said the bank expects this 0% returns Over the next decade, excluding earnings.
However, the market remains already on strong foundations as the economy continues to recover. The Bureau of Labor Statistics reported that 531 thousand job opportunities Added to the economy in October, more than the 450,000 economists expected. Consumer spending is also still strong.
No one knows for sure what lies ahead for stocks. But given the assessment procedure and the remaining uncertainty about inflation, Hunter’s perspective is one to keep in mind.