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Gary Shilling expects a 30% crash in stocks, a recession, and a commercial real estate collapse.
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The veteran forecaster has been issuing dire predictions about markets and the economy for years.
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Here are his 14 best posts on X since the pandemic struck in early 2020.
Gary Shilling recently warned the S&P 500 could plunge 30%, a recession is imminent, and commercial real estate is a bubble about to burst. He’s been issuing similarly dire predictions for years.
The veteran forecaster, who served as Merrill Lynch’s first chief economist before launching his own firm in 1978, has made several striking calls on X.
For example, he correctly predicted in early March 2020 that the stock market would keep plummeting. But he mistakenly dismissed the inflation threat a year later, and his cautions regarding stocks and the economy have missed the mark for more than a year now.
Here are Shilling’s 14 best X posts since the pandemic, lightly edited for length and clarity:
1. “10-yr Treasury note yield is below 1%, equities are in free-fall. If this doesn’t foretell global recession and further big equity price declines, I don’t know what would, especially in view of the Fed’s unexpected and large rate cut today.” (March 3, 2020)
Shilling’s call was correct as the S&P 500 crashed by another 25% before bottoming below 2,300 points on March 23, and global GDP shrank by 3.4% in 2020.
2. “Fear of the spreading #coronavirus is driving #StockMarket panic. With consumer and business retrenchment and worldwide supply chain disruptions, the global #recession2020 I’ve been anticipating is almost certain.” (March 6, 2020)
3. “#WallSt rallies on hopes the worst of the #CoronavirusOutbreak is over. To me, it’s like 1929 when stocks first fell, then rallied before plunging anew as the Great Depression set in. Today, the damage to worldwide economies is yet to unfold and stocks will collapse to new lows.” (April 7, 2020)
Shilling’s prediction was off the mark as the S&P 500 steadily climbed to a peak of about 4,800 points in November 2021, fell to below 3,600 points in October 2022, and has rallied since then to over 4,500 points today.
4. “The #economy and #StockMarket are leading separate lives. Expensive #stocks imply a robust, rapid recovery from the #pandemic while economic reports point to the #recession stretching into 2021. One of these forecasts will prove correct. I believe economic weakness will win out.” (November 1, 2020)
Shilling’s warning was wrong in hindsight as the US economy grew by 5.9% in 2021.
5. “I think the grand disconnect between exuberant #stocks and the somber real #economy will no doubt be closed with #stocks falling to levels that match continuing uncertainty and a likely further drop in real #GDP.” (January 4, 2021)
Contrary to Shilling’s view, the S&P 500 surged by more than 25% to almost 4,800 points by the end of 2021.
6. “@federalreserve largess + fiscal stimuli are flowing into #stocks, not the real economy. Speculation is rampant: i.e., #FAANG stock leaps, sky-high P/Es, mushrooming IPOs and SPACs, rising cryptos and the explosion of stocks of companies with little substance, like @GameStop.” (February 2, 2021)
Shilling was probably right to be skeptical of meme stocks, crypto, and SPACs as they fell out of favor, but Big Tech stocks like Microsoft and Amazon are trading at record highs.
7. “I don’t see a consumer-led economic boom unfolding nor do I think surging #inflation is in the cards. I also see cracks in the current financial-asset speculation #bubble.” (May 5, 2021)
Shilling was wrong on inflation, which surged to a 40-year high of 9.1% by June 2022, and consumer spending, which continues to buoy the wider US economy. But some assets such as regional-banking and commercial real estate stocks have seen significant declines.
8. “I don’t need the reported two straight quarters of negative real #GDP to tell me the US #economy is already in, or at least close to, a business downturn.” (August 15, 2022)
The US economy has continued to grow since then, meaning it’s escaped a business downturn.
9. “The real #USEconomy is really weak. Rising interest rates, yield curve inversion, slumping #StockMarket, collapsing #housing, declining real #RetailSales. And stubbornly high #inflation rates.” (September 15, 2022)
Shilling’s assessment was mostly off the mark. Inflation has slowed to below 4% in recent months, fueling hopes that the Federal Reserve will cut interest rates soon. Stocks have advanced this year, house prices remain near record highs, and retail sales have stayed strong, defying the inverted yield curve that has historically signaled a near-term recession.
10. “Don’t be fooled by this week’s #stockmarket rally. It’s a #BearMarketRally. Even so, many investors continue to be bullish on #stocks, which won’t hit true bottom until they reach the puke point.” (October 18, 2022)
The S&P 500 bottomed a few days before Shilling’s post, and has advanced by more than 20% since then.
11. “#FederalReserve rate hikes will lead to a recession and deepen the #bearmarket. The popular 60% #equities – 40% bond investment strategy has failed this year and both have suffered huge price declines.” (December 15, 2022)
Shilling’s calls on stocks and recession were wrong, as the S&P 500 and Nasdaq Composite have advanced by 19% and 36% respectively this year, and the US economy has continued to grow. But he was right on bond prices, which have slumped in recent months.
12. “Forces driving #economy and #FinancialMarkets in 2023: unfolding global #Recession, weak #consumer spending, #UkraineWar’s effects on #energy prices, US #housing weakness, subsiding #inflation and #bearmarket in stocks.” (January 17, 2023)
Shilling’s forecast has been largely wrong to date. The global economy has escaped recession, US consumer spending has held up, energy prices have come down but remain under pressure from foreign wars, house prices have been shored up by high mortgage rates that have spooked sellers, inflation has cooled, and stocks have advanced strongly this year.
13. “The #FederalReserve will hike #interestrates until it tanks the economy – and a recession may already be underway.” (March 16, 2023)
The Fed has hiked rates three times since Shilling’s post, but the economy hasn’t suffered a recession.
14. “Do I believe the @federalreserve will pause its interest rate hikes at its June policy meeting? No, the Fed is hellbent on getting #inflation down to its 2% target, even at the cost of a recession.” (May 16, 2023)
Shilling’s forecast was off the mark, as the Fed held rates steady in June. While it hiked them by 25 basis points to a range of 5.25% to 5.5% in July, it hasn’t raised them in its two meetings since then.
Read the original article on Business Insider
Source: finance.yahoo.com