28th August 2014
Two analysts have warned that markets could be facing a collapse of up to 60%.
Speaking to CNBC David Tice, president of Tice Capital and founder of the Prudent Bear Fund said that a jolt to international confidence in central banks will lead to a 30% to 60% market decline.
When this happens, he added, markets will face a “period of extreme turmoil.”
Speaking to the US network he said the crash will be precipitated by a disillusionment with the US Federal Reserve’s “confidence game,” which will then see inflation rise, and the central bank then rush to raise rates. At that juncture, “the Fed starts to lose control,” he added
Another bear is technical analyst Abigail Doolittle, the founder of Peak Theories Research. A day after the US benchmark index, the S&P 500 broke through the 2,000 barrier for the very first time, she said on “Squawk Box” that the Fed’s low interest rates could bring a “scary” 50-60% market correction.
She said that the market could endure a crash “similar to what happened in 2007”. Doolittle added: “It is tough to know what the exact catalyst will be. But that’s the very nature of that kind of sell-off. They start slowly and then happen very suddenly.”
“As scary as it is, I think that we could see possibly a 50% or 60% correction”
However not everyone is in agreement with Tice and Doolittle. For his part Dominic Rossi, chief investment officer, equities at Fidelity Worldwide Investment, said: “Despite the strong recovery of the past few years and the S&P 500 reaching the key 2,000 landmark, I remain bullish on the outlook for US equities and feel the strength and duration of the resurgence will surprise many investors.
“Equity market volatility remains anchored and the outlook for the US economy is supported by a number of positive structural factors, including the shale boom and the improving budgetary position. The earnings outlook also remains favourable and I think that those analysts that are arguing that US profits can’t go higher are very likely to be proved wrong.”