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‘The stock market can drop as much as 80%’: A 47-year market vet explains why we’re in the midst of a global bust — and makes a case for $10,000 gold


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‘The stock market can drop as much as 80%’: A 47-year market vet explains why we’re in the midst of a global bust — and makes a case for $10,000 gold

Chris Hondros/Getty This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. David Hunter, the chief macro strategist at Contrarian Macro Advisors, thinks the global economy is in the midst of massive “bust” consisting of two distinct phases.Phase two of the bust — which Hunter is forecasting to take…

‘The stock market can drop as much as 80%’: A 47-year market vet explains why we’re in the midst of a global bust — and makes a case for $10,000 gold

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  • David Hunter, the chief macro strategist at Contrarian Macro Advisors, thinks the realm economy is within the middle of broad “bust” consisting of two sure phases.
  • Fragment two of the bust — which Hunter is forecasting to occur in tiring 2020 or early 2021 — will be “steeper and deeper” than the ongoing first segment.
  • When all is claimed and performed, Hunter thinks the stock market can lose up to 80% of its mark. 
  • Attributable to unparalleled stimulus and inflationary pressures, Hunter thinks gold can hit $10,000 or elevated in this decade.
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David Hunter, the chief macro strategist at Contrarian Macro Advisors, just just isn’t in actual fact coy in his analysis of the existing economic atmosphere. 

“I guess we’re within the bust now,” he said in a most up-to-date O&M Companions interview. “So, I utilize the term ‘bust’ to portray one thing that’s better than a recession, steeper and worse than a recession, however not as elongated as a depression.”  

The blueprint Hunter sees it, the bust will occur in two components: (1) The preliminary shock and short-lived recovery (2) The “steeper and deeper” drawdown.

Upright now, we’re in segment 1. After preliminary annihilation due to COVID-19 pandemic, economic knowledge — though soundless feeble — is starting to enhance from its nadir.

But per Hunter, segment two just just isn’t in actual fact a ways off. We’re not out of the woods yet.

To him, it be entirely a subject of time until these measures turn south one more time. In his thoughts, the stimulus that central banks and governments are bestowing upon the economy are perpetuating an uneven recovery — one who’s not supportive of many sectors and sides of the economy that need support.

“Perhaps tiring this year, or early next, we are going to terminate this soar and commence heading the unsuitable blueprint one more time,” he said. “I guess the second segment, you comprise fundamental more insolvency points.”

Hunter’s insolvency forecast echos that of John Hussman — the outspoken investor and veteran professor who’s long predicted a market collapse. In a most up-to-date dispute, Hussman equipped the following chart from Bloomberg portraying a voracious uptick in bankruptcies.

Bloomberg, John Hussman
Bloomberg, John Hussman


When these insolvency points are coupled with incorrect debt and leverage — two metrics Hunter has been monitoring like a hawk — it be a recipe for catastrophe.

“Now we comprise debt past anything we can ever home up,” Hunter said in a outdated interview on “The Contrarian Investor Podcast.” “Whereas you occur to receive these surprises, that leverage in actual fact exacerbates no subject downturn you receive.” 

To Hunter, the implications will be frequent.

An 80% fall in shares and $10,000 gold

Earlier than the big unwind Hunter sees coming down the pike, he thinks markets will experience a voracious “soften up,” ensuing in new all-time highs. To him, the stark realization of the decimated underlying atmosphere has not yet shut to the forefront of investor consideration. This, coupled with an unparalleled amount of stimulus, ability a rally is due.

“So I guess within the following couple of months, it’s doubtless you’ll ogle … I have been calling from 4,200-4,500 on the S&P — I guess it’s doubtless you’ll ogle that this year and perchance by this fall,” he said. “And soften up ability it be going to head parabolic. It may perchance maybe receive even steeper than it be been out of the March trough.”

Nonetheless, when investor exuberance runs dry and the economy remains to be in dire straits, Hunter thinks the unwind will take bewitch. And though he is predicting a big fall in shares, he is a ways more sanguine on the blueprint forward for gold, which not too long ago soared to a file high shut to $2,000 per ounce. 

“I guess it may well perchance maybe receive to $2,300 in this rally this year,” he said. “And then I guess it will get hit like most resources within the bust. But, whereas I guess the stock market can fall as 80% within the second segment of the bust in a extremely steep bear market, I’m guessing that gold and the miners potentially originate not correct fundamental more than 30%, 35%.”

Hunter’s thinking within the attend of his outlook works like this: unparalleled stimulus results in inflation, which results in a weakened US buck, which results in a gold rally.

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“I guess we are going to ogle $10,000 gold, potentially elevated than that even, by the terminate of this decade.”

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