- From stocks to commercial real estate, many parts of the financial markets are on shaky ground.
- Experts have warned that stocks could crash by up to 50% and the crypto faces impending doom.
- Here are the 10 craziest predictions about asset prices and the economy over the past quarter.
From stocks and cryptocurrencies to commodities, it looks like a growing number of assets are in choppy waters.
Jeremy Grantham has warned that stocks could crashes up to 50% as an “everything bubble” bursts, while economist “Dr. Doom” Nouriel Roubini has sounded the alarm over an impending “crypto apocalypse” as the SEC tightens its grip on the digital asset space.
As various headwinds rock assets, the Federal Reserve’s interest rate hikes appear to be weighing on financial markets the most.
The Fed raised benchmark interest rates to more than 4.75% from near zero 12 months ago – the biggest rise in borrowing costs in the United States since the 1980s – to crush the surge in inflation. Higher rates encourage saving relative to spending, which can slow the pace of increases. But they can also dampen demand, lower asset prices and increase the risk of recession.
Here are the 10 craziest predictions for stocks, crypto, commercial real estate and the US economy over the past quarter by leading market commentators:
Equities: US stocks could crash 50% – or jump 20%
Legendary investor Jeremy Grantham topped the board for an extreme prediction on US stocks. The market historian predicted the S&P 500 could drop as much as 50% this year to around 2,000 as an “everything bubble” bursts.
Grantham said prices for stocks, bonds, real estate, fine art and other investments have reached unsustainable heights during the COVID-19 pandemic.
Market specialists Stephanie Pomboy And larry mcdonald echoed Grantham’s view – but with a less bearish prediction. While the pair expects stocks to tumble as much as 30%, McDonald said the plunge could occur over the next two months as rising interest rates stifle demand.
However, the bears aren’t the only ones turning heads with their eccentric predictions. Fundstrat’s bull market Tom Lee predicted that stocks increase by 20% this yearas historically, years of decline have more often been followed by a strong rebound than a sluggish performance.
Crypto: an “apocalypse” is coming for digital assets
Economist “Dr. Doom” Nouriel Roubini has no hope for the crypto industry. The famous economist said a “crypto-apocalypse” comes as the SEC cracks down on the digital asset space with tougher regulation.
“Finally, the SEC will have the [funding] to go after all other crypto scammers – and such,” he wrote. “The crypto apocalypse is coming!” Roubini said, referring to reports that the SEC is looking for additional funds for police misconduct in the crypto industry.
Commercial real estate: prices could plunge by 40% from their peak
In the commercial real estate sector, the chief investment officer of Morgan Stanley Wealth Management expects prices to dive up to 40% of their peak in a crash worse than the 2008 financial crisis.
This is due to a range of factors, including work-from-home trends, higher interest rates and tighter lending standards after the collapse of Silicon Valley Bank, which are making it harder for investors to refinance. a mountain of impending debt.
“MS & Co. analysts expect CRE prices to fall by up to 40%, worse than during the Great Financial Crisis,” Lisa Shalett told the weekly Global Investment Committee. note.
“More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated over the next 24 months, when new lending rates are expected to increase by 350 to 450 basis points,” she added.
Similarly, billionaire investor Leon Cooperman told CNBC that the sector will be the next victim of the banking turmoil. “I think that will spill over into commercial real estate as banks become more reluctant to lend,” Cooperman said. “That seems to be the scapegoat right now, [but] we will survive this,” he added.
Economy: the United States falls into a “catastrophic loop”
When it comes to the overall US economy, there are some pretty stark forecasts. The one that raised eyebrows comes from Roubini.
In a Project union editorial, he warned that the US economy was entering a “doom loop” as a vicious cycle of high inflation, rising debt burdens and financial instability threatens to engulf the country.
“A severe recession is the only thing that can temper price and wage inflation, but it will deepen the debt crisis, which in turn will lead to an even deeper economic downturn,” he said. “Since liquidity support cannot prevent this systemic catastrophic loop, everyone should prepare for the next stagflationary debt crisis.”
Roubini also said that the US economy was heading towards a “Bermuda Triangle” of risk.
Meanwhile, veteran researcher Luke Gromen has warned that the US economy is facing a “any problem” – and the Fed has only bad options to choose from as it tries to crush inflation by dragging the economy down.
“It’s not a problem of the banking system,” he said. “It’s a US Treasury G7 sovereign debt, balance of payments issue,” Gromen said.
“Treasuries underpin everything,” Gromen continued. “It’s the guarantee of the whole system. So if we’re going to have a cash flow problem, we’re going to have a problem with everything.”