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Home / Business / Here is the price to be paid for listening to 'Armageddonist' predictions from such as Soros, Icahn and Gundlach

Here is the price to be paid for listening to 'Armageddonist' predictions from such as Soros, Icahn and Gundlach



Cruel predictions of impending downturn in the stock market have been a recurring feature since the financial crisis of 2008, and an executive fund industry has had enough.

Michael Cembalest, chairman of JP Morgan Asset Management's marketing and investment strategy, rounded up apocalyptic predictions from a number of commentators, including famed investor George Soros, bond market giant Jeffrey Gundlach, activist Carl Icahn and New York Times columnist Paul Krugman.

He then calculated the consequences of moving $ 1 from the S&P 500 stock market index to the Barclays Aggregate Bond Index, from the time of these "Armageddon" predictions.


As the chart shows, losses will reach up to 60%.

To be sure, of course a recession will eventually come. But Cembalest's point is that the recession must be incredibly severe for investors to be rewarded by following bleak advice. "Using coarse matting would require a sustained, multi-year bear market with a 35% -45% drop from the top levels to reverse many of the opportunity losses shown in the chart," he says.

In today's conversation Cembalest does not expect the next recession to be bad, pointing to higher capital levels in US and European banks, the stronger balance sheet for US households, increased levels of foreign exchange reserves in emerging markets, and reduced dependence on foreign capital, and the low level of new US stock supply.

Nevertheless, Cembalest recognizes some risks, including stock valuations over the median, weak loan strength standards, large fiscal deficits, and the prospect of tougher regulation.

Buzz

Capitol Hill is in the limelight as the House Intelligence Committee kicks off the public version of its investigative investigation while Federal Reserve Chairman Jerome Powell testifies before the Joint Economic Committee.

Powell can reiterate that the United States is in a "good place" financially and that the central bank does not want to cut further after three pure interest rate cuts.

Markets will also be waiting for words on tariffs for European cars. , with expectations, the United States will postpone a decision for another six months.

October Consumer Price Data expires at 8:30 am EST. Market

After a day when the Dow Jones Industrial Average

DJIA, + 0.00%

produced accurate zero motion, U.S.

ES00, -0.30%

NQ00, -0.38%

YM00, -0.32%

was lower on Wednesday.

To reflect a transition to safer assets, gold futures

GC00, + 0.85%

achieved, and the return on the benchmark 10-year Treasury index

TMUBMUSD10Y, -1.81%

drops 4 basis points. Yields move in the opposite direction from prices.

The Hang Seng

HSI, -1.82%

fell as violence continued in Hong Kong and European stocks

SXXP, -0.45%

was weaker.

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