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Sell Every Stock Market Rally Because 2008-Style Recession Is Coming: JPMorgan

Last Updated September 23, 2020 1:48 PM
Kiril Nikolaev
Last Updated September 23, 2020 1:48 PM
  • JPMorgan’s CEO is warning that we’re headed for a stock market collapse similar to the 2008 meltdown.
  • As the novel coronavirus strangles the economy, we can expect a chain of bankruptcies.
  • One prominent investment strategist believes that we’ll face the greatest liquidity crisis of all time.

JPMorgan Chase’s top honcho Jamie Dimon is painting a gloomy economic and stock market outlook.

Dimon is the only current chief executive who navigated a big U.S. bank through the 2008 global financial crisis. When Dimon talks, the financial world tends to listen.

Dimon Expects Big Economic Downturn

In a 23-page letter to investors, JPMorgan’s CEO said that the coronavirus outbreak will ignite a big economic recession . The level of stress will be similar to the crash of 2008. Dimon says,

at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008.

During the global financial crisis, the S&P 500 lost nearly 60% of its value from peak to trough. This year, the bellwether index shed over 35% from the all-time high yet many are already calling a generational bottom.

Comparison between the two stock market meltdowns
Comparison between the two financial meltdowns. | Source: TradingView

What’s concerning about Dimon’s language is the use of a qualifier in “at a minimum.” It appears that JPMorgan’s top executive sees an additional 20% downside for the stock market at the very least. It could possibly be worse.

The bad news is that other analysts share his view.

Financial System to Face a Great Liquidity Crisis

Raoul Pal, a former Goldman Sachs executive, also believes that the pain for investors is not yet over. In a recent podcast, the founder of Global Macro Investor and Real Vision Group said that the stock market will plummet 20%  before it can put together a meaningful bounce.

In the interview, Pal says that investors will succumb to the greatest liquidity crisis of all time as the coronavirus pandemic suffocates multiple industries.

I think the balance of probabilities are that this is a much longer event in terms of the economic impacts… And I think it’s going to be the largest insolvency event in all history.

Pal expects many companies to file for bankruptcy as they struggle to find the cash to meet their financial obligations. The series of bankruptcies will likely ignite a severe economic downturn and put tremendous stress on the financial market.

Pal’s expectations align with Jamie Dimon’s outlook. Both expect the stock market to collapse as the novel coronavirus exposes the weaknesses of the U.S. economy.

Instead of buying the dip, these institutional investors are saying to sell every stock market rally.

The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered trading advice from CCN.com.