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Expect the S&P 500 to plunge 30%, recover and then suffer a historic crash, David Brady warned.
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He predicted that the Federal Reserve would support the market before the election.
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The analyst said economic and geopolitical forces would cause a market collapse after the end of the race.
Prepare for a 30% drop in stocks, a recovery before the presidential election and a crash to a 14-year low, a market analyst has warned.
The S&P 500 is about to fall from over 5,000 points to an 18-month low of 3,500 points, David Brady said on the latest “Thoughtful Money” podcast episode.
Brady is a money manager, former currency trader and author of “The FIPEST Report,” which analyzes metals and miners. He argued that stocks are vastly overvalued, that investors face far greater downside risk than potential upside, and that a sell-off seems assured.
However, he predicted that the Federal Reserve would step in to reverse the coming decline by cutting rates and growing its balance sheet — especially as the Biden administration wants a strong stock market and economy in the November election.
However, he warned that the recovery would not last long given increasing domestic and international pressure on the economy.
“My two cents is on the short term, a 20-30% drop, but then the Fed reacts like it always does and the market goes up,” Brady said. “After the election, stocks will come under pressure.”
“I expect the stock market to drop because of what’s happening in the economy and elsewhere in the world,” he said of his expected post-election decline.
Brady’s list of concerns includes a rise in inflation to 3.5% in the past two months, meaning the Fed may be able to keep rates high for longer. He also noted an increase in bankruptcies, car repossessions due to car loan defaults, credit card delinquencies and a decline in home prices.
“These to me are signs that the economy is on life support,” he said, adding that multiple foreign wars and pressure on the banking sector have contributed to a gloomy backdrop.
“I believe the market is also stagnant, and there are certain signs that I look at that will tell me it’s time to get out of Dodge,” Brady said. These signals include a drop in the S&P below 5,000 points or a de-inversion of the yield curve, he noted.
“They will all ultimately bring down the most overvalued stock market we’ve seen since the Great Depression,” he said of the myriad headwinds.
As for Brady’s post-election prediction, he suggested that the S&P could fall to around 1,000 points, erasing the index’s gains over fourteen years and returning the index to 2010 levels.
“I can see that we can get at least an 80% correction this time,” he said.
Brady isn’t the only one predicting doom. Michael Burry of The Big Short fame, GMO co-founder Jeremy Grantham and renowned forecaster Gary Shilling have all issued dire warnings about what lies ahead for the markets and the economy.
Still, it’s worth underscoring that the U.S. economy and stocks have largely defied the naysayers. Stocks hit record highs earlier this year, while inflation has cooled significantly, unemployment remains at historic lows and growth has been robust.
Read the original article on Business Insider
