For a while, things looked shaky: after exploding higher out of the gate, stocks swooned lower and for a few minutes, the S&P was even red for the year. But then the levitation returned right on schedule the moment algos heard of the most bullish market catalyst known to man: Dennis Gartman had doubled down on his bearishness.
As a reminder, the most recent Gartman appearance on these pages sparked a furious rally after the iconic contrarian indicator said on the morning of Monday, Dec 6 that "stocks are headed lower" and that a "bear market is required at this point." Stocks have soared higher since and hit a new all time high on Dec 30.
So fast forward to today when just as algos were starting to lose in the market's latest ramp, and that the all time high at 4,800 would be overcome any time soon, they got an unexpected tailwind when speaking on Bloomberg radio, Dennis Gartman said the most bullish thing imaginable: the "commodity guru" said that stocks could face a “slow, laborious” decline in 2022 as a result of a more hawkish Federal Reserve that may raise interest rates four times. The moment the interview hit is when stocks bottomed for the day.
Gartman, who is somehow also the University of Akron Endowment Chairman said that stocks could trade 10% to 15% lower this year. While Gartman has long been calling for a bear market, he said the catalyst for the decline could be the central bank raising interest rates amid a continued rise in inflation.
"The advent of a bear market will come when the Fed begins to tighten monetary policy, and that will be later this year. No question," said Gartman, who formerly published the influential “The Gartman Letter.”
While most of Wall Street is forecasting that the Fed will raise rates three times in 2022, Gartman expects a more aggressive approach in part because of newly appointed members who tilt hawkish. He also said one hike could be as much as 50 basis points and the benchmark overnight rate could jump at least 100 basis points from current levels by the end of the year. Of course, none of that will ever happen because by mid-2022 the CPI base effect will have passed, the economy will be in freefall, and Biden will realize that a strong stock market is all he has left going into the midterms so he would truly have to be demented to also push for a market crash as well.
But the clearest signal that stocks will continue ramping higher was Gartman's bearishness itself: as have have documented several thousand times, Gartman's record of calling out contrarian inflection points (i.e., being wrong) is 100% and... yes, our condolences to the bears, but this sucker is going higher.
The irony of continuing to call for a bear market as he has been proven wrong time and time and time again was not lost on Dennis: he admitted he’s been wrong for the past six months to call for a bear market. As the chairman of the University of Akron endowment, he reduced equity exposure by 10% to assure the foundation has ample spending money, but he said the risk in this strategy is that they miss out on further gains.
“I think it’ll be a slow, laborious decline in prices, not a crash of any sort of any substance,” said Gartman. “So it’s a matter of being less involved in the market. Going to the sidelines in a quiet and reasonable manner I think is the proper way to trade for the next year or two.”
Translation: the meltup will continue, and we will keep on hitting new all time highs until Gartman turns bullish.