Tags: guggenheim | minerd | recession | market | plunge

Guggenheim's Scott Minerd Predicts Recession, 40 Percent Market Plunge

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By    |   Friday, 06 April 2018 07:40 AM

Guggenheim chief investment officer Scott Minerd has warned savvy investors in a recent note that the stock market is on a "collision course with disaster."

Minerd told CNBC that the nation faces a recession, a 40 percent plunge in the stock market and a tidal wave of corporate debt defaults.

He predicts the Federal Reserve will try to halt the economic bloodshed, but he fears that central-bank antics will only add fuel to the financial wild fire.

Investors, however, still may have time to seek financial shelter: He expects the worst of the damage to start in late 2019 and into 2020.

"For the next year ... equities will probably continue to go up as we have all these stock buybacks and free cash flow," Minerd told CNBC's Brian Sullivan in a "Worldwide Exchange" interview. "Ultimately, when the chickens come home to roost and we have a recession, we're going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we'll probably see a 40 percent retracement in equities."

Once short-term rates rise to 3 percent, that will spark defaults and trigger a recession, he explained.

"As interest rates keep ratcheting higher, with record levels of corporate debt it's going to be harder and harder to service," Minerd said. "At some point, as the economy starts to mature and as cash flows start to stabilize and decline, it's going to be difficult for everybody to pay this interest," he said.

"Defaults are going to be concentrated in corporate America, where in the past downturn they were basically focused in areas of consumer activity," he added.

He predicts the Fed will try to come to the rescue and once again engage in the same quantitative easing policies that helped pull the economy out of the last recession and sparked a stock surge amid dismal economic growth.

"All that will do is defer the problem into the future and allow excesses to continue to build and the collision course that we're on will just come later and probably be worse," he said.

Minerd isn't alone in his dire economic prediction.

Newsmax Finance Insider Lance Roberts also recently warned that while America isn't yet in a recession, one "absolutely" lingers in the not so distant future.

"The shift caused by the financial crisis, aging demographics, massive monetary interventions and the structural change in employment which has skewed the seasonal-adjustments in economic data. This makes every report from employment, retail sales, and manufacturing appear more robust than they would be otherwise. This is a problem mainstream analysis continues to overlook but will be used as an excuse when it reverses," he wrote for Newsmax Finance.

"While the calls of a “recession” may seem far-fetched based on today’s economic data points, no one was calling for a recession in early 2000 or 2007 either. By the time the data is adjusted, and the eventual recession is revealed, it won’t matter as the damage will have already been done."

(Newsmax wire services contributed to this report).

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Guggenheim chief investment officer Scott Minerd has warned savvy investors in a recent note that the stock market is on a "collision course with disaster."
guggenheim, minerd, recession, market, plunge
Friday, 06 April 2018 07:40 AM
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