An 80% Stock Market Crash Is Approaching! Although investors are pulling their best efforts to keep propping up the massive bubble, conditions remain extremely risky. And given that stock prices have been stretched to the limit, when the crash finally occurs, it has the potential to wipe out 80% of the market’s value.
The sell-off may have paused for the time being, but the combination of several factors is likely to weigh on market sentiment sooner rather than later. And according to Peter Cecchini, the director of research at the hedge fund Axonic, the threat of a devastating recession in the U.S. and around the globe is growing.
He said that, despite the correction so far this year, major indexes are likely to still see a larger pullback over the coming weeks and months. Just like Cecchini, a number of Wall Street experts – including David Hunter, the chief macro strategist at Contrarian Macro Advisors, – are warning that the current rally is a melt-up that is merely preceding a meltdown, as some traders still hope for a slower pace of policy tightening.
The uncertain environment is precisely why stocks are still going up, according to Hunter. But one of the largest-ever stock-market crashes will follow as inflation runs rampant, he said.Given the amount of leverage in the stock market and the U.S. economy, Hunter warned that the coming stock market crash is going to be monumental. In an interview with Business Insider, the legendary investor said that an 80% pullback was already a real possibility before, but now it is already on the horizon.
At this point, propping up stocks doesn’t mean that indexes are recovering from their losses. In fact, on Monday, Morgan Stanley wrote in a note to clients that stocks remain in a bear market despite last week’s rally.“Bear market rallies are the most vicious,” wrote Morgan Stanley’s chief US strategist Michael Wilson. “While it could go a bit higher, led by the Nasdaq and small caps, we remain convicted it’s still a bear market and we would use this strength to position more defensively,” Wilson cautioned.
On the same note, David Rosenberg, the founder, and chief economist of Rosenberg Research, sounded the alarm about the end of fiscal stimulus and ultra-easy monetary policy. “Nobody has a clue what the economy or the market’s going to look like once those training wheels are taken off the bicycle,” Rosenberg said. “So what’s going to happen when all of that support is taken away?”
In Rosenberg’s view, the stock market is on shaky ground and a recession is coming soon. This is definitely an uncertain time for investors. Risks continue to grow, and traders should brace for a lot more volatility in 2022 as central banks and government leaders around the world react to the worsening situation in Ukraine, its impact on gas prices, the global economy, and inflation.
Meanwhile, in the U.S., as the Fed tries to stop rising prices but risks pushing the economy into a recession, it is safe to say that the sell-off will continue and that the correction will evolve into a full-blown market crash once investors realize that we’ve already reached the point of no return. A global financial meltdown is coming next. The nightmare is far from over.