Legendary Wall Street forecaster, Gary Shilling, has warned that stocks could plummet by as much as 30% and a recession could hit imminently. Shilling, the president of A. Gary Shilling & Co., made this prediction in an interview with “The Julia La Roche Show.” He had previously forecasted a decline of 30% to 40% in stocks, and he believes there could be a further decline of 30% from current levels.
If his forecast proves accurate, the S&P 500, which reached a record high of nearly 4,800 points in January last year, could drop to around 2,900 points, its lowest level since May 2020. Although the benchmark stock index fell 18% last year, it has recovered by 17% this year.
Shilling attributes his bearish outlook to the faltering US economy. He points to indicators such as the inverted yield curve, weakness in leading economic indicators, and the Federal Reserve’s commitment to tackling inflation. According to Shilling, these factors make it difficult to avoid a recession, which he believes is either imminent or already underway.
As a seasoned economist who accurately predicted many major market trends over the past 50 years, Shilling expects corporate profits to plummet by 20% to 30% during a recession, leading to a similar drop in stock prices. Shilling also anticipates lower inflation in the coming years due to the long-term trend of globalization pushing down prices. He suggests that the Federal Reserve will only cut interest rates significantly next year once the economy has considerably weakened and inflation is no longer a concern.
In light of his forecast, Shilling has positioned himself in Treasury bonds and the US dollar, while betting against stocks through exchange-traded funds and commodities by shorting copper. Additionally, he has identified commercial real estate, specifically office buildings, hotels, and shopping malls, as the “biggest bubble” currently on his radar, and he believes it is starting to burst.
Gary Shilling’s reputation as a market prophet stems from his accurate predictions and profitable actions during the collapse of the mid-2000s housing boom. As an expert in the field, his warnings about the potential stock market decline and recession should be taken seriously.
Source: Business Insider
