patrick.net

Guggenheim chief investment officer Scott Minerd is warning clients that the market is on a "collision course with disaster."

He sees a recession, a 40 percent plunge in the stock market and a wave of corporate debt defaults.

He expects the Fed to intervene to stem the crisis but says that will only make matters worse.

Along with the decline in equities, a rise in corporate bond defaults is likely as the Federal Reserve raises interest rates and companies struggle to pay off record debt levels.

"For the next year ... equities will probably continue to go up as we have all these stock buybacks and free cash flow," Minerd told CNBC's Brian Sullivan in a "Worldwide Exchange" interview. "Ultimately, when the chickens come home to roost and we have a recession, we're going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we'll probably see a 40 percent retracement in equities."

Corporate debt currently stands at a record $8.83 trillion, according to Securities Industry and Financial Markets Association data. Higher rates will make it harder for companies to refinance and will put pressure on them once the stimulative effects of tax cuts wear off, Minerd said.

Once short-term rates hit 3 percent, that will be enough to drive up defaults and cause a recession, he added.


https://www.cnbc.com/2018/04/06/guggenheim-investment-chief-scott-minerd-sees-a-recession-and-a-40-percent-plunge-in-stocks-ahead.html