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Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says

Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says


Business

Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says

The stock market faces a reckoning when investors come to terms with the coronavirus’ long-term economic damage, legendary economist Gary Shilling said. Shilling — who correctly called the housing-market crash of 2008 — told CNBC that equities could tank up to 40% once such realizations are made.  Such a drop would be “very much reminiscent…

Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says

  • The stock market faces a reckoning when investors come to terms with the coronavirus’ long-term economic damage, legendary economist Gary Shilling said.
  • Shilling — who correctly called the housing-market crash of 2008 — told CNBC that equities could tank up to 40% once such realizations are made. 
  • Such a drop would be “very much reminiscent of what happened in the 1930s” when investors came to grips with the Great Recession’s prolonged fallout and sold off risk assets, the economist added.
  • Shilling reiterated his love for Treasurys, noting he’s advocated for the safe-haven asset since 1981 and still thinks they’re “a great buy.”
  • Visit the Business Insider homepage for more stories.

The stock market faces a second, Great Depression-style downturn if investors realize how long-lasting the coronavirus’ fallout will be, economist Gary Shilling said.

Equities have cooled from their surging bull run as investors mull the odds of a second economic slump and the effectiveness of nationwide reopenings. The market’s meteoric rise through the second quarter mirrors a similar move made in 1929, when equities soared after a steep plunge. The bounce-back didn’t last. Markets tanked a second time in the early 1930s as investors stepped back and grasped the Great Depression’s economic toll. 

When today’s market participants similarly comprehend the virus threat, history will repeat itself and valuations will crumble, Shilling said.

“I think we’ve got a second leg down and that’s very much reminiscent of what happened in the 1930s where people appreciate the depth of this recession and the disruption and how long it’s going to take to recover,” the economist said in a CNBC interview published Monday.

He continued: “That’s why I think stocks could decline from here another 30% or 40%, and that might be optimistic.”

Read more: JPMORGAN: The coronavirus crisis has decimated one of the safest defenses long-term investors have against stock-market crashes. Here are 4 ways to pivot your portfolio now.

Shilling isn’t new to calling market crashes. The economist correctly called the housing-market bust well before 2008, warning the sector collapse would drag the entire economy down with it. He also predicted the bond market rally just before it began in 1981 and has since praised such assets for their stability.

Shilling’s love for Treasurys only grew stronger in the wake of the coronavirus and resulting market volatility. The economist expects a downward pressure on prices to benefit Treasury bonds and further extend a rally that began before the coronavirus turned global.

“I’ve been an advocate of bonds for 39 years and I still think they’re a great buy,” Shilling said. “If you look back at what has happened since the first of the year, the bond market started rallying literally the first trading day of the year. That was an indicator that we’ve got big problems.”

Now read more markets coverage from Markets Insider and Business Insider:

Goldman Sachs cuts US GDP estimate, now sees economy shrinking 4.6% in 2020

Did You See This CB Softwares?

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Amazon breaches $3,000 to hit fresh record — and experts say the bull run will continue into the post-pandemic economy

Bank of America identifies 3 indicators that could make or break the stock market this summer – and warns they’re all deteriorating fast

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Business

Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says

The stock market faces a reckoning when investors come to terms with the coronavirus’ long-term economic damage, legendary economist Gary Shilling said. Shilling — who correctly called the housing-market crash of 2008 — told CNBC that equities could tank up to 40% once such realizations are made.  Such a drop would be “very much reminiscent…

Stocks could fall 40% in a collapse mimicking the Great Depression, famed economist Gary Shilling says

  • The stock market faces a reckoning when investors come to terms with the coronavirus’ long-term economic damage, legendary economist Gary Shilling said.
  • Shilling — who correctly called the housing-market crash of 2008 — told CNBC that equities could tank up to 40% once such realizations are made. 
  • Such a drop would be “very much reminiscent of what happened in the 1930s” when investors came to grips with the Great Recession’s prolonged fallout and sold off risk assets, the economist added.
  • Shilling reiterated his love for Treasurys, noting he’s advocated for the safe-haven asset since 1981 and still thinks they’re “a great buy.”
  • Visit the Business Insider homepage for more stories.

The stock market faces a second, Great Depression-style downturn if investors realize how long-lasting the coronavirus’ fallout will be, economist Gary Shilling said.

Equities have cooled from their surging bull run as investors mull the odds of a second economic slump and the effectiveness of nationwide reopenings. The market’s meteoric rise through the second quarter mirrors a similar move made in 1929, when equities soared after a steep plunge. The bounce-back didn’t last. Markets tanked a second time in the early 1930s as investors stepped back and grasped the Great Depression’s economic toll. 

When today’s market participants similarly comprehend the virus threat, history will repeat itself and valuations will crumble, Shilling said.

“I think we’ve got a second leg down and that’s very much reminiscent of what happened in the 1930s where people appreciate the depth of this recession and the disruption and how long it’s going to take to recover,” the economist said in a CNBC interview published Monday.

He continued: “That’s why I think stocks could decline from here another 30% or 40%, and that might be optimistic.”

Read more: JPMORGAN: The coronavirus crisis has decimated one of the safest defenses long-term investors have against stock-market crashes. Here are 4 ways to pivot your portfolio now.

Shilling isn’t new to calling market crashes. The economist correctly called the housing-market bust well before 2008, warning the sector collapse would drag the entire economy down with it. He also predicted the bond market rally just before it began in 1981 and has since praised such assets for their stability.

Shilling’s love for Treasurys only grew stronger in the wake of the coronavirus and resulting market volatility. The economist expects a downward pressure on prices to benefit Treasury bonds and further extend a rally that began before the coronavirus turned global.

“I’ve been an advocate of bonds for 39 years and I still think they’re a great buy,” Shilling said. “If you look back at what has happened since the first of the year, the bond market started rallying literally the first trading day of the year. That was an indicator that we’ve got big problems.”

Now read more markets coverage from Markets Insider and Business Insider:

Goldman Sachs cuts US GDP estimate, now sees economy shrinking 4.6% in 2020

Did You See This CB Softwares?

37 SOFTWARE TOOLS... FOR $27!?

Join Affiliate Bots Right Away

Amazon breaches $3,000 to hit fresh record — and experts say the bull run will continue into the post-pandemic economy

Bank of America identifies 3 indicators that could make or break the stock market this summer – and warns they’re all deteriorating fast

Click to comment

You must be logged in to post a comment Login

Leave a Reply

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