Nomura’s Janjuah: S&P 500 Will Fall 25% Before the Elections

Tuesday, 21 Aug 2012 10:51 AM

By Michael Kling

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The Standard & Poor’s 500 Index will probably drop by 20 to 25 percent during the next three months, predicts Nomura strategist Bob Janjuah.

Financial markets will be disappointed by inaction from the Federal Reserve as well as eurozone leaders, Janjuah predicts, according to CNBC. The Fed, set to meet next week in Jackson Hole, Wyo., will not take decisive action to recharge the U.S. economy, while the European Central Bank and European politicians will fail to keep their promises, Janjuah writes in a research note, CNBC reports.

“For now we are happy to risk 30 S&P points against us, in order to potentially pick up 300 S&P points in our favor.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Investors will be in a “risk-off” phase until after the elections in November, he predicts. The S&P 500 will drop down to — or even below — the lows of 2011.

“This coming major risk-off phase will, in my view, also be very dollar bullish and bullish core government bonds,” he states, predicting that 10-year bonds could reach 1 percent.

Janjuah also predicts more monetary easing by the Fed in December, CNBC notes.

The S&P 500’s latest rally may be struggling because it passed 1,400, a level that’s become known as a rally killer, according to a report by analysts Will Geisdorf of Ned Davis Research, according to USA Today.

The index has repeatedly struggled and faltered after reaching 1,400, the report concludes. Based on that history, Geisdorf believes stock prices will stall for three weeks to three months and won’t start increasing until later in the year.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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