Stocks will fall at least 30% in a drawn-out bear market, investor David Tice warns
Long-time bear David Tice has a new warning for investors.
He expects stocks to fall at least 30% in a downturn that lasts two years. One of his major reasons: Business unfriendly policies from Washington.
“We now have a Biden administration that has a Senate and a House. They’re likely to enact very much more anti-capitalist policies,” the investor told “Trading Nation” on Friday. “They have already raised the minimum wage. That’s going to hurt earnings on the cost side.”
According to Tice, easy monetary and fiscal policies that support money printing will also sting Wall Street.
“All of this is not good for financial markets,” he added.
Tice is known for running the Prudent Bear Fund before selling to Federated in 2008, just as the financial crisis was unfolding.
Now as an advisor to the AdvisorShares Ranger Equity Bear ETF, Tice has spent much of his career making bearish bets during bull markets. His current fund, which is also designed to profit from underperformance, has been under pressure. It’s down 32% in the last three months.
In his latest warning, Tice contends the problems are piling higher. He also cites an overvalued market and coronavirus vaccine concerns for his pessimism.
“The vaccine is not really a panacea,” he added. “We’ve seen a lot of optimism about that, but there are new strains of the virus, and there is certainly risk going forward.”
CNN Business/David Goldman
Foreign companies are giving up on the United States and betting big on China, report says
Foreign companies are turning their backs on the United States, taking advantage of China’s booming economy and superior management of the Covid-19 pandemic.
Direct investment in the US by foreign companies plummeted 49% to $134 billion last year, according to a report released Sunday by the United Nations Conference on Trade and Development. By contrast, foreign direct investment in China grew by 4% to $163 billion in 2020.
2020 marked the first year in history that foreign direct investment in China overtook that of the US, according to the UN. China is now the world’s largest recipient of foreign companies’ investments.
Although Covid-19 was a large factor in foreign direct investment tumbling in the US — and most places around the world — the drop-off in foreign companies’ American investments began well before the pandemic.
After hitting a high of $440 billion in 2015, according to the US Commerce Department, foreign investment in the US has been on a sharp downward slide. Former President Donald Trump’s go-it-alone trade policies hurt foreign investment — particularly from China, which represented the sharpest drop in US investment over the past several years. Growing economic uncertainty around the globe also contributed to the decline.
Last year, decline in foreign direct investment into the US was most prominent in wholesale trade, financial services and manufacturing, the report said. International mergers and acquisitions, as well as sales of US assets to foreign investors, fell by 41%.
Meanwhile, China’s explosive economic growth — and quick recovery from the pandemic — helped foreign investment there soar. China’s economy grew 2.3% last year, when most of the world’s major economies shrank. The country enforced stringent lockdown and population tracking policies intended to contain the virus, and set aside hundreds of billions of dollars for major infrastructure projects to fuel economic growth.
Fox Business/Jonathan Garber
Rising interest rates spell trouble for stocks
Wall Street is growing increasingly concerned that rising interest rates could derail the red-hot U.S. equity market, which is hovering near record levels.
The S&P 500 has climbed 2.3% this year, extending the rally off the March 23 bottom to over 71%, propelled by investor enthusiasm that low-interest rates will help support a sustained and strong economic recovery.
But worries are mounting that the unprecedented amount of fiscal and monetary stimulus unleashed will ignite a return of inflation that has been lacking since the onset of the 2008 financial crisis.
Those concerns have aligned a sharp rise in longer-term interest rates with the 10-year yield climbing 57.4 basis points since Aug. 4 to 1.089%. Wall Street worries a further increase in rates could be the breaking point.
“You’re going to see the early signs of a tremor before the end of 2021,” said Sri Kumar, president of the Santa Monica-based Sri Kumar Global Strategies. He predicts Democratic control of both chambers of Congress will result in even more stimulus and pressure on Federal Reserve Chairman Jerome Powell to ease policy further.
President Biden earlier this month unveiled his $1.9 trillion coronavirus aid package that would extend larger direct payments to most Americans and temporarily increase unemployment benefits, among other things.
“Without decisive action, we risk falling into a serious economic hole more than we find ourselves in,” Brian Deese, director of the National Economic Council, said Friday.