- Paul Dietrich said the S&P 500 index was at risk of falling 44% to its lowest point in nearly four years.
- A top strategist explained that selling long before the stock price crashes could result in huge profits.
- Dietrich predicted a mild recession in the United States this year, based on multiple warning signs and threats.
The stock market could be heading for a 44% crash, and getting out early could pay off, Paul Dietrich said.
The chief investment strategist at B. Riley Wealth Management recalled in an April book that he moved clients from stocks to bonds in 2000 and from stocks to cash, bonds and gold in 2007. . Market commentary.
Mr. Dietrich’s clients missed out on the huge rise in stock prices over the next year or so. But they were also spared the incredible blow of the subsequent bursts of the dot-com and housing bubbles.
During the 2000-2002 recession, when the S&P plummeted 49% and the Nasdaq 78%, it ended up returning 7% before fees. Although it lost about 6% of its total fees during the 2008-2009 recession, its performance outpaced the S&P’s 57% decline over the same period.
“Even though it’s fun and exciting to participate in events like today’s Mardi Gras, stock market bubble Investors completely untethered to stock fundamentals miss most of the 49% or 57% decline in the S&P 500 index and return to the stock market when leading economic indicators and long-term moving averages indicate the recession is over. Assume it is possible. ” Dietrich said.
He emphasized that the “highly overvalued” S&P index would need to fall 8% to return to its 200-day moving average, and that the index has declined an average of 36% in past recessions.
Therefore, Dietrich said the benchmark could fall 44% to about 2,800 points. This level was last reached at the height of the pandemic in 2020.
Dietrich also explained why a mild recession is expected again this year. He pointed to the dizzying valuations of stocks, the flashing red charts, the historic rise in the so-called Buffett indicators, the risk that interest rates will remain high for an extended period of time, and the price of gold. record high price As a sign that the market and economy are headed for trouble.
The Wall Street veteran added that the recession has been delayed for several reasons: huge amount Rising government spending, consumers borrowing more to make purchases, and a historically tight labor market showing signs of cracking.
Dietrich’s latest warning The stock market and the economy ignore his and other prophets’ opinions, so it’s natural to be skeptical. dark predictions It’s been many years now.
In addition, famous investors such as Warren Buffett warned It is virtually impossible to time the market, so you should either be against investing steadily ordollar cost averaging method“Investing in index funds is a much better strategy.
However, Wall Street executives such as JPMorgan CEO Jamie Dimon, Goldman Sachs CEO David Solomon, and Citigroup CEO Jane Fraser Several leading business leaders have all warned that markets are not pricing in the risks posed by threats such as inflation, recession and geopolitical conflict.
