Investment guru David Stockman warns savvy investors to escape the market while you can, before an inevitable 40 percent crash comes.
“This is just day traders, chart monkeys, robo machines. This has nothing to do with rationality or investment analysis on any reasonable time basis,” Stockman recently explained to CNBC about the booming stock market since President Donald Trump took office.
“There’s no Trump boom. We’re near the end of this cycle. Recessions haven’t been outlawed. It will happen in the next year or two,” said Stockman, who served as President Ronald Reagan’s director of Office of Management and Budget.
“We hit peak Trump and peak market at 2,940 on the S&P back in September. I think that’s the peak for a long time to come, and I think Trump foolishly embraced the stock market,” Stockman added.
“We’ve got headwinds coming from all over the world, and you can see it in the export data, in the European economy, in the big troubles going on in China, [and] you can see it in our own data, which has been really weak,” said Stockman.
He also warns about the record budget deficit.
“It is a huge risk. I mean it’s actually crazy time that this market and Washington, both ends of the Acela corridor, are totally ignoring,” Stockman said. “We’re going to go into a fiscal crisis in the 2020s when the entire baby boomers are retiring and Social Security and Medicare are soaring that we won’t come out of. That’s the big elephant in the room.”
Others agree with Stockman's dire prediction.
Nobel laureate Robert Shiller warns that the U.S. is overdue for a recession amid signs the housing market is slowing down.
“It's been a long time that we've been in this recovery period and it wouldn't surprise me at all if there was a recession,” the Yale University professor of economics recently told Bloomberg Television.
“The economy has been growing pretty smoothly. There are some signs though that there might be things amiss. For you know the housing market is soaring and the stock market is high,” said Shiller, the co-founder of the Case-Shiller Index, which tracks home prices around the nation.
"We have been going through the biggest housing boom actually the third biggest housing boom since 1890 when my data began. The biggest was from 1997 to 2000," said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.
"But then before that there was one in the 1940s. But this is the third. It's big," he said.
Meanwhile, such a dire outlook appears to be in the minority.
For example, chief financial officers are confident the U.S. economy will not experience a recession in 2019, according to the latest CNBC Global CFO Council survey.
CFOs are less confident in the European Union’s ability to avoid a recession. The CFO outlook for the U.S. did decline for the first time in five quarters, and North American-based CFOs continue to worry about stock market valuations, CNBC reported.
In addition, White House economic adviser Larry Kudlow says he doesn’t see any reason that the economy won’t continue to grow at a robust clip of at least 3 percent far into the future.
“Money is flowing into the USA like never before. We are the hottest economy in the world,” the veteran financial guru and former Ronald Reagan adviser recently told CNBC.
Kudlow spoke shortly after the government said the U.S. economy fell short of the Trump administration’s 3 percent annual growth target in 2018 despite $1.5 trillion in tax cuts and a government spending blitz, and economists say growth will only slow from here.
A better-than-expected performance in the fourth quarter pushed gross domestic product up 2.9 percent for the year, just shy of the goal, Commerce Department data showed.
“I'm very optimistic. The policies are working. I need to say that lower tax rates, deregulation, trade reform, energy reform. It's working,” said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
“These policies are working so I'm going to say 3% 2018 and I'm going to say 3% 2019 and 3% as far as the eye can see,” said the head of the National Economic Council that advises President Donald Trump.
“New business formations are strong, consumer confidence snapped back after the shutdown and maybe we'll get to the improved prospects for China trade,” said Kudlow, who served as the Trump campaign's senior economic adviser.
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