Peter Boockvar, leading strategist of The Lindsey Group, and commentator at CNBC says that the artificially inflated ‘bull market’ will end after the presidential elections. Asset exchange rates – mainly corporate and government bonds – are going to plummet quite soon. This will scare professional and retail investors and asset managers too. As a result, general consumption will decline and a recession spiral will begin in the American economy, which already shows a weakening tendency. According to our interviewee, all these factors are not affected by whether Clinton or Trump wins the elections.
Péter Zentai: I have noticed that among the American investors and investment advisors, you are one of the most pessimistic as for the future of the markets and the economy. It would even seem logical that exchanges will rally, and the American economy will gain momentum if Hillary Clinton wins…
Peter Boockvar: Whoever wins, the long-term effects are irrelevant for investors. Trump or Clinton? In this regard, it does no matter… I strongly believe that whoever wins, exchanges will enter ‘bear market’.
The fall of 2011 was similar. However, the following years did prove pessimistic asset managers and investors wrong, and they lost a lot of money for it…
In the last years, it was not the nature or the functioning of the markets that increased the price of the main corporate and government bonds, but the ‘terror’ of central banks and their artificial interventions. This price increase exceeded the growth of both economies and corporations. The zero or below-zero interest rates that were issued by central banks, generated enormous inflation on capital markets. In the past twenty years, this is the third bubble, significantly larger than the previous two. It will inevitably burst.
We are living in the second longest so-called bull market – for now. We are also in the eighth year of a faint but very much existing economic growth. Even though Fed and other central banks still try to dominate markets by following the same strategy in 2017, the chance for success is declining. However, by every passing day it is getting more likely that the new president will have to lead the United States in an economy heading towards recession and crashing markets with accumulating government deficits and growing debts. This makes it quite certain that the new president elected on 8th November will only be able to serve one cycle and be in office for four years.
How will be there recession and bear market?
The American economic growth rate shows a decreasing tendency. The new president has to admit that the current economy does not have the potential to offer more than 1.5 percent GDP growth. Market operators will realize that too, just like that central banks will eventually run out of their supplies. They are incapable of achieving something better and more efficient, and what they have been doing did not bring any significant economic recovery. In the coming months, soon after the elections, share prices will begin to fragment, which can easily have an impact on performance of the whole economy. Consumers gotten used to continuous share and bond price rises will have to face sudden and serious losses, and in response they will cut back their purchases, leading to further asset price falls. As a result, the economy will start to wither and there will be recession.
If you were right, what prices do you think will increase?
First and foremost, the price of gold will. Furthermore, the shares and corporate bonds of natural resource rich and predictable, safe countries will be the victors of the coming period; countries such as Canada, Australia and in some ways, Brazil and Chile too. Or the relatively cheap – in comparison with the absolutely overpriced American market – European market too.