/Stock market crash: Expert foresees 80% S&P 500 drop, gold at $10,000 – Business Insider

Stock market crash: Expert foresees 80% S&P 500 drop, gold at $10,000 – Business Insider


  • David Hunter, the chief macro strategist at Contrarian Macro Advisors, thinks the global economy is in the midst of massive “bust” consisting of two distinct phases.
  • Phase two of the bust — which Hunter is forecasting to take place in late 2020 or early 2021 — will be “steeper and deeper” than the ongoing first phase.
  • When all is said and done, Hunter thinks the stock market can lose up to 80% of its value. 
  • Due to unprecedented stimulus and inflationary pressures, Hunter thinks gold can hit $10,000 or higher in this decade.
  • Click here to sign up for our weekly newsletter Investing Insider.
  • Click here for more BI Prime stories.

David Hunter, the chief macro strategist at Contrarian Macro Advisors, isn’t coy in his assessment of the prevailing economic environment. 

“I think we’re in the bust now,” he said in a recent O&M Partners interview. “So, I use the term ‘bust’ to describe something that’s bigger than a recession, steeper and worse than a recession, but not as elongated as a depression.”  

The way Hunter sees it, the bust will take place in two parts: (1) The initial shock and short-lived recovery (2) The “steeper and deeper” drawdown.

Right now, we’re in phase 1. After initial annihilation due to the COVID-19 pandemic, economic data — although still weak — is starting to recover from its nadir.

But according to Hunter, phase two isn’t far off. We’re not out of the woods yet.

To him, it’s only a matter of time until these measures turn south again. In his mind, the stimulus that central banks and governments are bestowing upon the economy are perpetuating an uneven recovery — one that’s not supportive of many sectors and facets of the economy that need help.

“Probably late this year, or early next, we’ll end this bounce and start heading the other way again,” he said. “I think the second phase, you have much more insolvency issues.”

Hunter’s insolvency forecast echos that of John Hussman — the outspoken investor and former professor who’s long predicted a market collapse. In a recent note, Hussman provided the following chart from Bloomberg portraying a voracious uptick in bankruptcies.

Bloomberg, John Hussman



Bloomberg, John Hussman


When these insolvency issues are coupled with excessive debt and leverage — two metrics Hunter has been monitoring like a hawk — it’s a recipe for disaster.

“We have debt beyond anything we can ever manage,” Hunter said in a previous interview on “The Contrarian Investor Podcast.” “When you get these surprises, that leverage really exacerbates whatever downturn you get.” 

To Hunter, the implications will be widespread.

An 80% drop in stocks and $10,000 gold

Prior to the massive unwind Hunter sees coming down the pike, he thinks markets will experience a voracious “melt up,” resulting in new all-time highs. To him, the stark realization of the decimated underlying environment has not yet come to the forefront of investor attention. This, coupled with an unprecedented amount of stimulus, means a rally is due.

“So I believe in the next few months, you’ll see … I’ve been calling from 4,200-4,500 on the S&P — I think you’ll see that this year and probably by this fall,” he said. “And melt up means it’s going to go parabolic. It’s going to get even steeper than it’s been out of the march trough.”

Still, when investor exuberance runs dry and the economy is still in dire straits, Hunter thinks the unwind will take hold. And although he’s predicting a massive drop in stocks, he’s much more sanguine on the future of gold, which recently soared to a record high near $2,000 per ounce. 

“I think it can get to $2,300 in this rally this year,” he said. “And then I think it gets hit like most assets in the bust. But, whereas I think the stock market can drop as 80% in the second phase of the bust in a very steep bear market, I’m guessing that gold and the miners probably don’t correct much more than 30%, 35%.”

Hunter’s thinking behind his outlook works like this: unprecedented stimulus leads to inflation, which leads to a weakened US dollar, which leads to a gold rally.

“I believe we’ll see $10,000 gold, probably higher than that even, by the end of this decade.”

Original Source