Stocks and home prices are about to fall and the US economy is about to cool, says Vincent Deluard.
Investors will grab higher bond yields and wary sellers will end up putting their homes on the market, he says.
The StoneX strategist sees a slowdown in 2024 after government spending fueled a “trampoline landing”.
Brace yourself for a fall in stock and home prices and a slowdown in the US economy after the “trampoline landing,” a leading strategist warned.
“I’m worried about stocks,” Vincent Deluard, the director of global macro strategy at StoneX Group, told RealVision this week. “We’re getting to the point where things hurt.”
Deluard noted that the S&P 500 is up 25% from its October lows and is now trading at more than 22 times earnings. Investors may decide to reduce their exposure to equities given mounting pressure on corporate earnings and the fact that yields on 2-year and 10-year Treasuries have risen to nearly 5% and 4% respectively, he said.
The frozen US housing market will also thaw in time, Deluard said. Many homeowners have taken out cheap fixed rate mortgages and don’t want to give them up by selling. The lack of inventory has pushed home values up, even though the Federal Reserve’s interest rate hikes since last spring have pushed mortgage rates up sharply.
“Look at the real estate market, nobody wants to sell,” Deluard said. “But eventually people change jobs, move, get divorced, die. That will drive prices down.”
As for the broader U.S. economy, it has defied recession forecasts and recovered for a number of reasons, Deluard said. He pointed to government spending programs such as the Inflation Reduction Act and CHIPS and Science Act, cost-of-living adjustments to payments for Social Security recipients, and inflation-related adjustments to income tax brackets.
However, Deluard predicted that the growth outlook would deteriorate by January or February. “A lot of that momentum is going to slow down, it’s going to hit the brakes,” he said, adding that the Fed’s rate hikes will eventually “bite.”
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