Economist and investment advisor Gary Shilling, sticking to his view that “investor exuberance is irrational,” expects the S&P 500 to fall 35% from here on recessionary pressures on corporate earnings.
“There’s an ongoing tug-of-war between optimistic investors who foresee a soft landing for the U.S. economy, and the Fed, which is determined to reduce inflation to 2%, even at the likely cost of a recession. We bet on the central bank and the reliable recession harbingers such as the inverted yield curve and the declining leading indicators index,” he wrote in his monthly “Insights” newsletter, released Thursday.
“Rising interest rates are rewarding Treasury bond buyers but making already high-priced equities even more expensive, relatively. The Fed promoted the 2022 drop in stock prices, and recessionary weakness in corporate sales and earnings will probably drive the S&P 500 down about 35% from here to meet our 40% total decline forecast,” Shilling said.
The adviser has predicted a 40% drop from the stock market’s January 2022 peak since last year.