Dennis Gartman, chairman of the University of Akron Endowment and a well-known investor, said that as the Fed raises interest rates, U.S. stocks are at risk of another 10% drop.

“A lot of my long positions were stopped last Thursday and Friday,” Gartman said in an interview with Bloomberg on Monday.

He said:

U.S. stocks could fall further. The use of margin has been falling, which has been one of the signs that the market is peaking. Beware, I think U.S. stocks will drop at least another 5%-10% from where they are now, maybe more.

Gartner has long predicted bearish U.S. stocks and expects the catalyst to be a hawkish Fed rate hike to combat the fastest inflation since the 1980s .

But Gartman, author of the influential “The Gartman Letter,” has also admitted that he was wrong about a bear market forecast for 2021, with the S&P 500 up about 27% last year. .

So much so that some investors use his forecast as a contrarian indicator.

ZeroHedge, a well-known financial blogger, commented that algorithms, quantitative investing and hedge funds, and almost all investors read the book “Gatman Letter” only to do the opposite. And precisely because Gartman’s forecast for 2022 is still more pessimistic, bulls everywhere have a lot of hope that when the Fed announces that it will start buying ETFs in a few months, stocks could soar to all-time highs.

But then again, the S&P 500 is down 11% so far this year. Gartner said in January that U.S. stocks could face a drop of as much as 15% in 2022.

Will the Fed have the guts to raise rates into ‘pain territory’?

Today, analysts’ forecasts of market movements depend largely on forecasts of how tight the Fed’s policy action will be.

Consistent with Gartman’s view, the market generally believes that to really contain inflation, the Fed needs to raise the federal funds rate into “pain territory.”

At present, the futures market has already priced in the Fed’s expectation of a 50 basis point rate hike at the FOMC meeting next month, a 75 basis point rate hike at the June meeting, and a 50 basis point rate hike at the July meeting.

However, some fund managers questioned whether the Fed was brave enough to do so.

Luke Ellis, chief executive of investment management firm Man Group, told CNBC on Monday that he doubts the Fed will be confident enough to act aggressively this year, especially with headline inflation showing signs of tapering and the U.S. mid-November period. Elections are approaching.

The U.S. CPI rose 8.5% in March, hitting a 40-year high, but core inflation eased slightly, providing some hope that inflation may be close to a peak.

Ellis said:

That means inflation lasts longer and ultimately suffers more, but the question is whether the Fed has the guts to actually push rates higher to contain it.

Skeptical of aggressive Fed tightening, the fund manager advised investors to adjust their portfolios in response to a “prolongation of the tightening process.”

This article is reprinted from: https://news.futunn.com/post/14870116?src=3&report_type=market&report_id=203991&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.