The S&P 500 Poised To Lose $10 Trillion In Value

Palisade Research's picture

The last two recessions were devastating for the S&P 500.

The dot-com bubble during March 2000 to October 2002 saw the Index drop -49%, while the Global Credit Crisis from October 2007 to March 2009 saw an even greater drop of -57%.

Since then, the S&P 500 has been on fire, gaining 250% and breaking record highs almost daily.

As the old adage goes, “the bigger they are, the harder they fall”. If the S&P loses 57% in the next market crash, that would represent $10 trillion in value lost, and would take the Index down to 1,077.

As the more cyclical sectors begin to decline, portfolio managers will begin to reallocate capital to more attractive sectors.

As we noted in our previous write-up, Gold Stocks To Explode When The S&P Implodes, in the current bull market, the S&P is up 247%, while gold stocks are down -30%. If the pattern holds, the succeeding bear market in the S&P will trigger a major gold rally, which we predict will continue into the next S&P bull.

Portfolio managers will look for undervalued stocks in sectors considered safe havens. Gold stocks check all the boxes and a surge of capital will soon find its way into them.

Using the materials sector as proxy to gold stocks, we saw in each of the last two bears the weighting of the sector increase. The total value drop was also less in terms of percentage compared to the overall market. We calculate inflows of $206 billion in 2000-2002, and $270 billion in 2007-2009.

If the coming drop follows that of the recent recession, we can expect an inflow of at least $440 billion into gold stocks. That is a lot of money on the sidelines. And when it begins to pour in, gold stocks will explode.

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Bam_Man's picture

The Dow is only up 2 freakin' points today.

Quick - get Bullard or some other Fed F**kstick out there talking about moar QE and rate cuts!!!

Snaffew's picture

where is all this "money on the sidelines" I keep hearing about because every other sentence is how investors/money managers should be or are fully invested in this bull market.  Now, all of a sudden, there's half a trillion lying around on the sidelines basically getting negative yield?  i thought the only place to put money to work was in American markets..."Where else can you park your money" is the most overused sentence from the talking heads and analysts out there.

journal's picture

Many of us here would love to see such a correction, not many would want to witness the social upheaval.

journal's picture

Many of us here would love to see such a correction. Not many of us would like to live through the social upheaval.

LawsofPhysics's picture

Bullshit. The public equity "market" is never going down again because true price discovery is 100% DEAD.

In addition, the entire planet is going to experience the DEATH OF ALL FIAT CURRENCY (which is the denominator in all the market pricing).

Water everywhere and not a drop to drink...

"Full Faith and Credit"

Golden Phoenix's picture

If we draw a down arrow on a chart can we make it crash too? Does using crayon on the screen count?

punkster's picture

So when does this big correctoin begin?  How many times has this guy been wrong saying almost the exact same thing over the past 6 years? From what I can tell on Zerohedge, the only analysts getting the markets right is Shepwave. 

oddjob's picture

Shepwave is great if you enjoy malware.

steveo77's picture
  1. Did you confiscate any computers, Ipads, phones at the Mesquite house?

  1. Do you have access to all recent Paddock's medical records?
  2. Has he been diagnosed with any serious disease lately?
  3. Has he ever been on any anti-depressants or other psychoactive drugs? 
  4. First shot reported at 10:00 PM, but first phone call to Police reported to be at 10:08 PM please explain this gap.
  5. Between first call to Police at 10:08 and breach of room at 11:20, that is 72 minutes long.   Please explain why that room was not breached say 4 to 6 minutes, the lock could easily be shot out with pistol fire if need be.
punkster's picture

You posted that on the wrong comment board. 

StackShinyStuff's picture

Clearly they were waiting outside the door until the call came in that they had reached 50 confirmed kills.  Please tell me I do not need a sarc tag.  

Silver Savior's picture

Would not be surprised. Don't care either. I am only interested where that money will go. Mike Maloney says that wealth  is transfered not destroyed. Send that shit to my asset classes. These business people don't really need it.

zzzz88's picture

let us pray the rigged bubble will not burst because once it is burst,

it will not stop at -57%, maybe -80%,-90%



equity_momo's picture

Was poised to do this in Jan 2016 but Janet got to the bat-phone in time and told her fellow club members to print 3 trillion dollars over the next 18 months.

Hey presto we rallied 25%.

Until the Fed walk the talk on QT and rate hikes none of this massive downside risk can materialize.  If idiots will buy 100 year Austrian govn paper at 2% they sure as fuck will buy some American equity at a PE of 30,40,50 whilst the CBs stoke the mother of all bubbles. 

Only ends when the Fed lose control of the currency (ie , people/corps/countries stop accepting it)

BandGap's picture


Too many people focusing on what the US will do, print money, yada yada yada. The real trigger is what some others in the world will do - completely out of US control, although our boys are ceratinly trying to bully their way through this.

When countries start allowing the dollar to have equal status with other currencies it will be death by a thousand cuts. And this has already started.

What a shitshow. Tax cuts, my ass.

Davidduke2000's picture

In the early 80's after the savings and loan fiasco, interest rates went to over 20% and the central banks were unable to stop it as when the market take over, propagandists lose their power. 

onthedeschutes's picture

Are you the official replacement for Graham Summers at Phoenix Capital?  Or maybe same guy using a different handle?

Tim Knight from Slope of Hope's picture

As long as he doesn't make Jimmy Kimmel cry, I'm good with it.

TerminalDebt's picture

OMG the stock market is gonna crash, I haven't heard that before in the last 10 years while it doubled