Former Reagan Budget Director David Stockman warns savvy investors to take cover because a “horrendous storm” is about to hit global financial markets.
"This is one of the most dangerous market environments we've ever been in. It's the calm before a gigantic, horrendous storm that I don't think is too far down the road," he recently told CNBC.
The former director of the Office of Management and Budget also predicts a government shutdown that could erase all the stock market gains since the election.
"I don't know what Wall Street is smoking. They ought to be getting out of the casino while it's still safe. Yet there's this idea that since he [Trump] wasn't incriminated, that proves that we can move on," said Stockman, who was the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan. "I think it's crazy."
Stockman believes the S&P 500 could easily fall to 1,600, about a 34 percent drop from current levels, CNBC.com explained.
"There is nothing rational about this market. It's just a machine-trading-driven bubble that's nearing some kind of all-time craziness, mania," said Stockman, who served as a Republican U.S. Representative from the state of Michigan (1977–1981).
Stockman also fears that the continuous political volatility will eventually upend the markets.
"You get worried about that because the system is determined to unseat Donald Trump," said Stockman.
"If the Senate can involve itself in something this groundless, it's just more hysteria about Russia-gate for which there is no evidence. If they can bog themselves down in this, then we have a dysfunctional, ungovernable situation in Washington," he said.
Stockman fears Trump’s tax reform and infrastructure plans will die on the vine.
However, not all economic experts have such a gloomy forecast.
To be sure, chances are remote the U.S. economy will fall into a recession in the next 12 months despite a recent flattening of the U.S. yield curve suggesting growing recession risk, Deutsche Bank's economists said on Monday.
Based on other bond market indicators, they estimated the probability of a U.S. recession from now to June 2018 at less than 10 percent, Reuters reported.
(Newsmax wires services contributed to this report).
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