Rickards: “Yes, It Will Get Worse”
Posted September 21, 2022
“A stock market crash is imminent,” our colleague Jim Rickards said this afternoon. “Markets have turned markedly negative already today.”
If you’ve been following Jim’s research, you know he’s made some bold predictions over the years.
And he’s got the receipts to prove it.
In his book Aftermath he said…
“The next financial crisis would be caused by something on the scale of a global pandemic, and that it would happen with “100% certainty” within the next few years…”
In The New Great Depression, he wrote that…
“The lockdowns won’t work and they go down as one of the biggest policy blunders in the history of the world…”
And last year, he said:
Russia invading Ukraine would happen with 90% certainty…
Long before that prospect was on anybody’s radar…
His latest prediction is perhaps his boldest. And, he’s so confident, he’s putting his reputation on the line. (And it has everything to do with what happened at 2PM today.)
It’s not too late to act.
Below, Jim gives the high level overview, revealing the current state of the markets.
The State of the Markets
The U.S. stock markets are in a long-term decline with some potential for a severe market crash.
The tech-driven Nasdaq Composite Index has declined from 16,057 on Nov. 19, 2021, to 11,425 at yesterday’s close — a 29% decline in 10 months. The S&P 500 Index has declined from 4,784 on Jan. 4, 2022, to 3,855 as of yesterday, a 19% decline in less than nine months. The Dow Jones Industrial Average Index has declined from 36,799 on Jan. 4, 2022, to 30,706 at yesterday’s close, a 17% decline in less than nine months.
The Nasdaq and S&P 500 are solidly in bear market territory based on these metrics (although the August rally created a new bull market interrupted by the September drawdown according to some), and the Dow Jones is solidly in correction territory.
Regardless of the bull/bear labels, all three indexes have been characterized by a pattern of lower highs and lower lows indicative of long-term bear markets regardless of occasional rallies.
Of course, you won’t read this analysis in Wall Street research nor hear it on financial television...
The buy the dips crowd is alive and well. The Wall Street cheerleaders have an endless supply of new pom-poms in the form of narratives about a soft landing, Fed pivot and shallow recession (if any).
Economic data does not support the happy talk narrative. The Fed will eventually have to stop their rate hikes but not before the recession is severe and the damage has been done. Inverted yield curves in the Treasury market and eurodollar futures are both strongly indicative of a much worse recession hitting later this year or early 2023 at the latest.
Low labor force participation rates (about 61%) belie the notion of tight labor markets coming from near record low unemployment rates. Inflation will cool off quickly and not for good reasons; it will cool off because the recession is growing worse and unemployment will start to rise. The war in Ukraine and related supply chain disruptions continue with no end in sight.
The difficulty with a slowing economy and declining stock markets is not that they’re happening (they are) but that they could suddenly grow much worse.
The coming recession is beginning to bear some resemblance to the run-up to the 2008 global financial crisis.