Leuthold Group Doug Ramsey says 2019 inventory market rally will not final
financial recession within the subsequent two years that might wipe out all of the inventory market features of Donald Trump’s presidency. The S&P 500, as of Tuesday’s shut, was up 28 p.c since Election Day on Nov. 8, 2016.
Through the previous three recessions, the S&P 500 misplaced about 37 p.c from December 2007 to June 2009; misplaced about 2 p.c from March 2001 to November 2001; and really gained 5 p.c from July 1990 to March 1991.
Over the subsequent 12 months, Ramsey believes the S&P 500 might “undercut” final 12 months’s closing low of two,351 on Christmas Eve, which capped off a risky 12 months and a dismal closing three months of 2018.
“I feel it is going to be scary over the subsequent couple of months,” Ramsey mentioned in a “Squawk Field” interview, a day after the S&P 500 surged almost 1.three p.c to 2,744 for its third straight constructive session. The index, nonetheless, remained about 6.Eight p.c under its all-time closing excessive of two,930 again in September — even with the 16.7 p.c achieve since Dec. 24.
Ramsey, in making his case, reiterated a pair valuation comparisons he made in mid-December. He mentioned a markdown to the identical price-to-earnings ratio seen on the October 2007 high would ship the S&P 500 to 2,250, about 18 p.c under Tuesday’s shut. The identical comparability however utilizing price-to-sales would despatched the index to 2,050, about 25 p.c decrease.
Buyers would possibly need to take into account bonds quite of shares, Ramsey instructed.
Yields on 2-year, 5-year, and 10-year Treasurys are all “under ranges they hit on the Christmas-Eve lows” within the inventory market, he mentioned. “You would be again to having a 1-handle on the yields I simply talked about — 2s, 5s, and 10s. I do not assume it is a unhealthy place to park cash proper now; away from shares and into the intermediate a part of the Treasury curve.” A 1-handle means a quantity under 2 p.c.