A market veteran said a bear market and recession are on the way.Thomson Reuters
A long-time market veteran anticipates a bear market and recession to hit the US.
Jon Wolfenbarger pointed to falling earnings and the inverted yield curve, among other factors.
He said the extended duration of the yield-curve inversion suggests a longer recession.
Longtime market watcher and strategist Jon Wolfenbarger expects stocks to crater and the US economy to tip into a prolonged recession.
In a note published Monday, the 32-year investing veteran pointed to several economic indicators that are flashing warnings of a downturn, as well as a deterioration in earnings, overvalued stocks, and “irrational exuberance” similar to that of the early-2000s Tech Bubble.
The Conference Board’s Leading Economic Index, for one, has continued to decline at an annualized pace only seen during recessions, he said.
On top of that, the inverted yield curve — one of the most famous predictors of a downturn that has been accurate over the prior eight recessions — has remained inverted for the longest stretch in over five decades.
“The depth of the latest yield curve inversion has only been matched or exceeded by those preceding the Great Depression and the major recessions of the mid-1970s and early 1980s,” said Wolfenbarger, who is the founder of the site Bull and Bear Profits and a former banker at JPMorgan. “That is not a comforting sign, to say the least.”
The 10-year and three-month Treasury yields remain inverted today by about 1.29%, the strategist added, and history suggests the extreme length of time it’s been flipped will lead to a longer recession than many have forecasted.
The Conference Board, for its part, predicts a coming recession to last two quarters, but Wolfenbarger disagrees.
“We expect it to likely last at least a year, based on the length of the yield curve inversion,” he maintained.
The bear case for stocks
It’s not just the economic outlook that appears bleak to Wolfenbarger. He’s bracing for a fresh bear market to begin on account of a deteriorating earnings landscape and…
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