When several of the big money-driving voices in financial media and major financial institutions start saying the same thing I am, I start to wonder about myself. Or is it just becoming that obvious now? Some of the biggest names on Wall Street are now saying the stock market is delusional and is headed for a much deeper fall.
Even if you don’t have money in stocks, you might want to listen. The destruction of trillions of dollars of wealth in the world as the Fed hoses up all the money-slop is changing the world and will continue to do so. So, before you go bargain-scooping for those fire-sale stocks, consider the predictions in this article by market gurus that have finally started sounding a little like yours truly with my predictions of the coming Epocalypse (though they are not quite that crazy yet):
The Daily Doom, during just the first two days of this week, covered a few surprising voices in its headlines that brought forth this message, which I’ll summarize for you in the article that follows:
- Delusional Markets Are Underestimating Inflation Again, BlackRock and Fidelity Warn
- S&P 500 Gravy Train Boarding Now Has Flawed Earnings Assumption
- US banks get ready for shrinking profits and recession
- Jamie Dimon Says Fed May Need to Hike Interest Rates Beyond 5%
- Morgan Stanley: US equities face much sharper declines than many pessimists expect with the specter of recession likely
… and in tomorrow’s edition … one more:
The two-Michael’s madness
I’m not criticizing them. They simply now share my madness, having come into their predictions a few months after I started anticipating this journey back in the summer of 2021.
The strongest of these voices is Michael Wilson of Morgan Stanley. While I did criticize Zero Hedge for making so much of the “Two Michaels’” predictions when Michael Wilson and Michael Hartnett of BofA predicted a huge rally for November-January, the market did manage to pound out another perfectly typical bear market rally. That fizzled out at the size of earlier rallies and didn’t as long as the Michaels made it sound, but it is now meagerly attempting to reclaim that height in first part of January, which Wilson had said would still be good for the market up to about January 15, if I recall what he wrote almost three months ago:
This time, the stock market didn’t return to the bottom of its year-long, bear-market channel because Santa Clause, who failed to deliver an actual rally at the end of 2022, did, at least, clip the bottom off the market’s mid-December slip in the snow to where the market slid sideways on its butt through the remainder of December. Now delusional market investors are trying their best to be market makers and drive the market up in their re-inflated hope that a new year may be one of better news and somehow magically wipe away the mess of the last two years.
Not so, says Wilson, who is the only voice from big banks that has been right for an entire year in his bearish cast (as Hartnet joined him a couple of months in). No, the worst fall is yet to come. Wilson predicts another 22% avalanche right up ahead, even though the S&P already managed to finish last year at a 19% recess, leaving it sitting right back at the threshold of that 20% drop-off that put it in this unabating bear market. So, no matter what the market does in the weeks ahead, if you don’t believe me, you might want to pay attention to Wilson who has seen things generally the same way I have all of last year, and who has a lot of math to back his predictions up:
Michael Wilson — long one of the most vocal bears on US stocks — said in a research note that while investors are generally pessimistic about the outlook for economic growth, corporate profit estimates are still too high and the equity risk premium is at its lowest since the run-up to 2008. That suggests the S&P 500 could fall much lower than the 3,500 to 3,600 points the market is currently estimating in the event of a mild recession….
“The consensus could be right directionally, but wrong in terms of magnitude,” Wilson said, warning that the benchmark could bottom around 3,000 points — about 22% below current levels.
Wilson, for his score of successes all of last year, was ranked #1 in an institutional survey. If he continues to be as right in his trajectory predictions this year as he was all of last year, the market will be approaching the zone (dollar-green box) and glide path I predicted in a Patron Post last January this market would get to:
I’ll note that, while Wilson was right in each of the steps last year the market took, he revised his ultimate bottom for the year as he went along. However, he did, at least keep revising down ahead of the markets moves. So, if you followed him, you would have done well in staying out of harm’s way and catching some rallies along the way.
I laid out several paragraphs of explanation for the lines in my chart to my Patrons, and then explained this was not going to be short ride in getting there:
Further down the road, the following graph shows the zone where I think the … S&P is most likely to end when the Everything Bubble finishes imploding based on the stock market’s strongest longterm trends and support levels….
Somewhere in the green box looks like a natural resting point for the S&P. That is, at least, back to the bottom of the 2020 implosion — the steepest on record, but I don’t think it will get there in one shot. I’ve never suggested that.
In the very least, I think we are going to wipe out the absurd rocket ride since the COVID recession. One of the most insane things I’ve heard recently is that this market still needs to form a blow-off top. Really? What on earth do you call that final rise compared to ALL other rises before it if that is not peak market-mania melt-up?…
The longest, steepest, and (because it is happening during a global pandemic) most insane rise the market has ever made supposedly shows no sign of a melt-up yet??? Just put my head in a vice and squeeze it. That is by far the biggest rocket ride anyone has ever seen, and it has been happening while the entire underside of the market corroded away to where more than fifty percent of NASDAQ stocks are now in their own bear markets, leaving no support to the outer skin of the market that remains inflated. (Yet, there are still idiots saying, “Buy the dip.”)
“The Everything Bubble Bust Pt. 1: How Far Will the Stock Avalanche Fall?“
Of course, the market fell more and more from the time I wrote that in January, but the delusional investors that refused to believe in the Big Bear scenario that seemed so apparent to me kept buying the dip all the way down all of last year. So, January did, indeed, turn out to be the top for the S&P and the Dow. Those who were standing where the guy in this photo at the top of the article would have done well not to take the trip over the edge from that cornice on the all-time-spectacular blow-off-top:
But, you know, do as you want. Some people love to ski avalanches, and some of them even live. Depends on the size of the avalanche and the skill of the skier, but this bear has been one of the big ones, and it still has lots of room to roll, and now even the market’s biggest enthusiasts are saying it, not just bearish Wilson (who is far from a permabear). That January summit, of course, was just the beginning of this big bear market for the S&P and Dow. I was merely pointing out we had passed the first mile marker in the Russell 2000 and almost in the NASDAQ to where the other major indices, which were just starting to crack, would be joining the avalanche for the rest of its trip down the mountain.
