Tags: tallbacken | purves | stocks | drop | political | chaos

Tallbacken's Purves: Stocks to Drop 8.5 Percent by Year-End on Political Chaos

Tallbacken's Purves: Stocks to Drop 8.5 Percent by Year-End on Political Chaos
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Monday, 07 October 2019 09:46 AM

The 2020 U.S. presidential candidates, the incumbent included, are leaving one prominent bullish investor feeling his least optimistic in more than a decade.

Michael Purves, chief executive officer at Tallbacken Capital Advisors LLC, is now expecting the S&P 500 Index to end the year at 2,700, a 8.5% drop from Friday’s close. The market is back to what what he calls a “wolf” market, a term he coined in 2010. He defined that as “very volatile and very range-bound.”

Now, he said, “When you have Trump, Warren, Sanders on the front page of the newspapers, it’s a different type of wolf market than it was in 2010.”

“None of these presidential outcomes is screaming pro-growth,” he said.

The S&P 500 has fallen in seven of the past 10 weeks, even after posting on Friday its biggest one-day gain since Aug. 16. The choppy trading he described as characteristic of a “wolf market” may continue through the year-end.

More than 20 other forecasters tracked by Bloomberg expect the U.S. stock index to end the year at 2,939, about where it’s been trading in the past week. The S&P 500’s 18% gain this year makes it one of the 10 best-performing stock markets globally.

The concerns range from President Donald Trump’s trade war with China, which Purves says has upended certainties like supply chains, to what he called less business-friendly policies by Democratic Senators Elizabeth Warren and Bernie Sanders.

“None of these are classic centrist politicians,” said Purves, a former chief global strategist at Weeden & Co. “Trade and the 2020 election are two risks that are impossible to get edge on -- you can only scenario plan.”

Warren has said she plans to break up large companies including Facebook Inc., Amazon.com Inc. and Alphabet Inc.’s Google.

If Warren were to be elected, “then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge,” Facebook Chief Executive Officer Mark Zuckerberg said to employees in leaked audio recordings published by the Verge. “And does that still suck for us? Yeah. I mean, I don’t want to have a major lawsuit against our own government.”

Warren also advocates a 2% tax on assets above $50 million. In addition to worries about his companies, Mr. Zuckerberg is worth almost $70 billion, according to the Bloomberg Billionaires Index.

Along with Warren, Sanders is also emphasizing income inequality and higher taxes on the rich as main themes of his campaign. The Vermont senator was discharged from a Nevada hospital on Friday after suffering a heart attack.

Still, Purves doesn’t think equities will collapse in the next 18 months.

“It’s hard for me to be a real bear, but I can certainly see a lot of things that make it seem like we’re not going to rally a lot here, unless we get a real reversal,” he said.

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The 2020 U.S. presidential candidates, the incumbent included, are leaving one prominent bullish investor feeling his least optimistic in more than a decade.
tallbacken, purves, stocks, drop, political, chaos
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2019-46-07
Monday, 07 October 2019 09:46 AM
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