After a robust performance in 2023 that saw the S&P 500 reaching within 0.5% of its all-time high, recent weeks have ushered in a notable slowdown for the US stock market, signaling a shift in momentum as 2024 unfolds.
This recent downturn is attributed to a combination of factors, including uncertain signals from Federal Reserve minutes regarding rate cuts and persistent strength in the labor market, a key inflation driver.
Amid these challenges, a respected US economist sounded alarm bells, predicting not just a temporary setback but a potentially 30% crash for the market in 2024.
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What happened?
Gary Shilling, Merrill Lynch’s first chief economist and a renowned market analyst, said the S&P 500 could plunge as much as 30% this year.
“I think we still can have a 25% or 30% decline in the S&P.”
– Shilling said during a Rosenberg Research webcast in late December.
The economist said the US recession may already be underway and warned that the Fed is unlikely to begin cutting rates before the summer, in contrast to consensus expectations.
“I think we’re probably in a recession now. National Bureau of Economic Research [will] wait until they get all the data in, the revisions, and everything else. By the time they make the call, it’s about as handy as a pocket in your underwear.”
– he added.
Shilling also voiced concerns about other headwinds that could weigh on investors’ appetite toward stocks, including potential layoffs and weaker company earnings.
Shilling not confident about the “soft landing”
Additionally, the expert said investors may be overly hopeful that the Fed will successfully orchestrate the so-called “soft landing,” a gradual and controlled economic slowdown achieved by central banks through measured adjustments in monetary policy, minimizing the risk of a sharp downturn.
“Soft landings are pretty rare. There’s only been one in the entire post-war period, and that was in the mid-90s.”
Shilling pointed out during the webcast
Among his many interesting takes in the webcast, Shilling also said hasn’t “any interest in gold,” due to its dependence on numerous factors such as deflation, inflation, political risks, mining, and others.
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