The stock market is poised for a 40% drop, warns economist who says the current climate feels a lot like 1929
“‘I think we’ve got a second leg down and that’s very much reminiscent of what happened in the 1930s where people appreciate the depth of this recession and the disruption and how long it’s going to take to recover.’
That’s A. Gary Shilling, longtime economist and president of A. Gary Shilling & Co., again delivering a gloomy take on what’s next in a recent CNBC interview.
“Stocks are [behaving] very much like that rebound in 1929 where there is absolute conviction that the virus will be under control and that massive monetary and fiscal stimuli will reinvigorate the economy,” he said, adding that the market could drop as much as 40% over the next year.”
CNN Business/Julia Horowitz
Goldman Sachs thinks the US recovery is running into trouble
“The surge in coronavirus cases across the Sun Belt is slowing the economic recovery in the United States.
That’s according to Goldman Sachs, which said this weekend it now expects a weaker rebound in the third quarter as local leaders impose fresh restrictions and consumers show signs of caution. The investment bank predicts the US economy will grow at an annualized rate of 25% in the three months ending in September, as opposed to 33%.
“The recent declines are minor compared to the collapse in activity in March and April, but they clearly indicate a break from the steady upward trend since mid-April,” chief economist Jan Hatzius told clients.
Goldman Sachs said it thinks spending on consumer services will “pause” in July and August.
“Over the last few weeks, the Covid situation in the US has worsened significantly to the point where the US is now a notable outlier among advanced economies,” the bank said.”
Bloomberg/Reade Pickert, Yue Qiu and Alexander McIntyre
U.S. Coronavirus Surge Beginning to Show Up in Recovery Data
“The U.S. economy is gradually recovering as businesses reboot and scores of Americans head back to work, but a record surge in virus cases threatens to upend that improvement as reopening efforts stall in some places.
Bloomberg Economics created a weekly dashboard of high-frequency, alternative and market-based data to track the economy’s plunge into recession and eventual recovery. Most of the dashboard’s indicators, including applications for jobless benefits, consumer confidence and public-transportation usage, point to modest, incremental improvement. But some measures, including restaurant bookings, have slightly worsened.
Recent reopenings paired with government-sponsored small-business loans have helped bolster hiring across the nation. In June, U.S. employers added a record 4.8 million workers to payrolls. Even so, America’s jobs engine is still far short of where it was before the pandemic.”
Gold to perform well in Q3, on track to $2,000 by late-2021 — TD Securities
“Gold is likely to have another solid quarter after it wrapped up Q2, up more than 14% since the start of the year, according to TD Securities.
After some turbulent trading near the $1,800 an ounce level, gold is back in a tight trading range right below that resistance level. At the time of writing, August Comex gold futures were trading at $1,795.2, up 0.29% on the day.
“The yellow metal has now rebounded back to over $1,770/oz and will likely perform well into Q3,” TS Securities commodity strategists wrote last week.
Any sell-offs due to positive macro data are likely to only be temporary for gold as higher precious metal’s prices and firmer economy can co-exist alongside each other, the strategists pointed out.
“Spot gold slipped below $1,770/oz immediately after the much stronger-than-expected U.S. June payroll (+4.8 million) data. The very strong positive equity market response to the jobs data likely drove more capital into risk assets at the expense of gold, at least initially. There’s an element of missing-out anxiety that is lifting risk appetite,” they said. “However … the USD is weakening, and real rates should drop as inflation expectations continue to rise.”
There are some COVID-19 after-effects that will continue to linger long-term, boosting gold higher for the rest of 2020 and into 2021.”