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Paul Dietrich said the S&P 500 is at risk of falling 44% to a four-year low.
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The chief strategist explained that selling stocks long before they collapse can achieve significant returns.
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Dietrich predicted a moderate recession in the United States this year based on multiple warning signs and threats.
Paul Dietrich said the stock market may be headed for a 44% crash, and an early exit could pay off.
with me. The chief investment strategist at Riley Wealth Management moved his clients from stocks to bonds in 2000, and from stocks to cash, bonds and gold in 2007, he said in his April report. Market commentary.
Dietrich's clients missed out on the massive rises in stocks over the next year or so. But it also escaped stunning blows from the collapse of the dot-com bubble and the housing bubble.
They ended up netting 7% before fees during the 2000-2002 recession, when the S&P collapsed 49% and the Nasdaq fell 78%. They lost about 6% in total fees during the 2008-2009 recession, but that performance beat the S&P's 57% decline over the same period.
“As fun and exciting as it is to participate in today's Mardi Gras celebration Stock market bubble Completely unconstrained by any stock fundamentals, let's say an investor might miss most of the 49% or 57% decline in the S&P 500 and then return to the stock market when leading economic indicators and long-term moving averages indicate that the recession is over. said Dietrich.
He stressed that the “significantly overvalued” S&P would have to fall 8% to return to its 200-day moving average, and the index has fallen by an average of 36% in previous recessions.
Consequently, Dietrich said the index could suffer a 44% decline to around 2,800 points – a level it last touched at the height of the pandemic in 2020.
Dietrich also explained why he expects a moderate recession this year. He pointed to stock valuations and charts Red flasha historical leap in the so-called Buffett indicatorThe risk of interest rates remaining higher for a longer period, and gold prices Hit record highs As signs that the market and economy are headed toward problems.
The Wall Street veteran added that the recession was overdue Huge quantities Government spending and consumers Debt accumulation To make purchases, the job market is historically tight It shows signs of cracking.
Dietrich Latest warnings There is reason to be skeptical, as the stock market and economy have challenged his and other pessimists' opinion. Gloomy forecast For years now.
Moreover, famous investors like Warren Buffett have done so to caution Against trying to time the market because it is almost impossible, invest steadily or “Average cost in dollars“Getting into an index fund is a much better strategy.
However, many of Wall Street's biggest players, including the CEO of JPMorgan Jamie DamonGoldman Sachs CEO David Solomon, and Citigroup CEO Jane Fraser Everyone warned Markets do not price in the risks posed by threats such as inflation, recession and geopolitical conflicts.
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