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‘Peak Trump’ Author Predicts 40 Percent Drop in Stocks, Says Rally Is Irrational

Last Updated September 23, 2020 12:34 PM
Gerelyn Terzo
Last Updated September 23, 2020 12:34 PM

Former U.S. budget director from the Ronald Reagan era David Stockman is predicting a stock market collapse. Stockman, who is also the author of a book called “Peak Trump,” is not impressed by the S&P 500’s three-day winning streak or the fact that the index is about close at a multi-month high after last week’s declines. While most of Wall Street is cheering today’s rally, Stockman is waiting for the other economic shoe to drop, taking the S&P 500, which is currently hovering at $2,819, down to the $1,600 level or lower in the process.

The doom and gloom pontificator predicts the market is about to fall off a cliff, telling CNBC  he is bracing for another 40% decline in stock prices from current levels. Meanwhile, the broader market indices remain higher by double-digits year-to-date, with tech stocks from Apple to Amazon leading the way.

Stockman calls it an “arbitrary starting point,” chalking it up to “day traders, chart monkeys, [and] robo machines,” saying it has “nothing to do with rationality or investment analysis.” He would much rather take a longer-term view of the stock market over the past 14 months when the S&P 500 was hovering at about the same level as where it is trading today.

Source: Yahoo Finance

Bumpy Economy Ahead?

He goes on to suggest that an economic recession is up ahead:

“There’s no Trump boom. We’re near the end of this cycle. […] It will happen in the next year or two.”

Meanwhile, Donald Trump and China’s Xi Jinping are reportedly closer than ever to a trade deal. This would pave the way for greater economic clarity. Stockman, however, remains unconvinced:

“The idea that somehow there is going to be a China deal and that will make everything better, I think, is laughable.”

In his new book, whose full title is “Peak Trump: The Undrainable Swamp and The Fantasy of MAGA,” Stockman argues that the best days for the S&P are behind the Trump administration:

“We hit peak Trump and peak market at 2,940 on the S&P back in September. I think that’s the peak for a long time to come, and I think Trump foolishly embraced the stock market.”

To be fair, it is a risky bet to take credit for a stock market whose whims can be unpredictable. A Proverb goes, “He who lives by the sword dies by the sword.”

As for the economy, however, the president has fostered “pro-growth policies” that have kept it expanding.

As for Stockman, even a broken clock is right twice a day, and this not the first time that he has sounded the alarm.