With Morgan Stanley's (former) uber-bear Michael Wilson emerging recently as one of the biggest bulls on Wall Street, a power - or rather wildlife - vacuum emerged over the spot of who will be crowned Wall Street's next super bear (excluding such icons as Albert Edwards) of course. However, it increasingly appears that Guggenheim's weightlifting CIO, Scott Minerd, may be the obvious shoo-in for the spot in light of his recent apocalyptic predictions.
Four weeks after tweeting on when the market may have hit a bottom, saying we know we have not reached the bottom "when the talking heads on CNBC are buying" (incidentally that tweet took place on what has been the market's bottom so far)...
How do we know when we have not reached the bottom? When the talking heads on CNBC are buying.— Scott Minerd (@ScottMinerd) March 23, 2020
... the chief investment officer of Guggenheim Investments double down and said gains in the S&P 500 are unsustainable and the stock benchmark could fall as low as 1,200 when it retreats.
"Investors who are sitting out there right now who rebalanced a few weeks ago and moved from fixed income to equities should probably think about rebalancing again,” he said Friday on a panel. “It could be 1,500, 1,600, 1,200" referring to how far the S&P could fall in its next crash.
Minerd’s opinion is the opposite from the views at Goldman analysts and Morgan Stanley Chief Executive Officer James Gorman, both of whom said it’s unlikely that the market hits new lows. Gorman said the S&P 500 at 2,850 in the near term, then heading lower, he said on the panel hosted by the United Nations Office for Partnerships and the nonprofit Goal 17.
Bank of America CIO Michael Hartnett was inbetween, saying that "SPX 2850-2950 is a ceiling due to Profits & Politics" while "SPX 2350-2450 is a floor due to Positioning & Policy." In other words the next move is lower, but not too low.
Jeff Gundlach is closer to Minerd's camp, tweeting last week that the new narrative: “thanks to the Fed there will be no retest” will likely not come to pass either, leaving “a takeout of the March lows” as the base case.
“A successful near-term retest of the March lows” was such a consensus opinion no wonder we got a big, rapid rally instead. The new narrative: “thanks to the Fed there will be no retest” will likely not come to pass either, leaving “a takeout of the March lows” as the base case.— Jeffrey Gundlach (@TruthGundlach) April 9, 2020
None of these views, however, are anywhere near the devastation that Minerd expects - with Elliott's Paul Singer coming closest warning in his latest letter to clients that stocks could drop a total of 50% from their February highs, in other words dropping as low as 1,600.
“The market at this level based upon where earnings are doesn’t represent any kind of intrinsic value,” Minerd said . “It is being entirely propped up by liquidity.”
As Bloomberg adds, the Guggenheim CIO said there could be rolling shutdowns for the next two years, preventing a full-scale return to work, and that U.S. unemployment could reach as high as 17%. More than 20 million jobs have been lost in the last four weeks.
“It’s going to be a long haul to get back to the unemployment levels we saw prior to the downturn,” Minerd said. “That’s why I’m so concerned about a longer-term plan to encourage business to get people back to work.”