© James Leinsey Traders on the New York Stock Exchange. James Lanes- From stocks to commercial real estate, many segments of the financial market are in crisis.
- Experts warn that stocks could fall by 50%, and cryptocurrencies will not be happy.
- Here are 10 of the most daring asset price and economic predictions of the last quarter.
More and more assets, from stocks and cryptocurrencies to commodities, are finding themselves in turbulent waters.
Jeremy Grantham warns stocks could drop 50% when the "everything bubble" bursts, and Doctor Doom economist Nouriel Robini sounds the alarm about the next "crypto-apocalypse" as the SEC cracks down on digital assets. Location
While several headwinds hit assets, the Federal Reserve's rate hike appears to be putting pressure on financial markets.
The Fed raised benchmark interest rates to 4.75% from near zero 12 months ago, the biggest rise in US borrowing costs since the 1980s, to reverse rising inflation. Higher rates encourage people to save more than they spend, which can keep inflation in check. But they can reduce demand, lower asset prices and increase the risk of bankruptcy.
Here are the predictions of 10 leading analysts of the stock market, cryptocurrencies, commercial real estate and the US economy for the last quarter.
Stocks: US stocks can fall 50% or rise 20%.
Renowned investor Jeremy Grantham led the bullish outlook for US stocks. A market historian predicts that the S&P 500 could fall 50% this year before around 2000, when the “everything bubble” bursts.
Grantham says the value of stocks, bonds, real estate, fine art and other investments have risen to unsustainable levels during the COVID-19 pandemic.
Market pundits Stephanie Pomboy and Larry McDonald backed Grantham's view, but made fewer predictions. While the pair expects shares to fall 30%, McDonald said a decline is likely in the coming months as higher interest rates dampen demand.
However, not only bears attract attention with their majestic projections. Bull market Tom Lee predicts that Fundstrat stock will rise 20% this year because historically, years of decline are often followed by strong rallies rather than stable returns.
Crypto: "Apocalypse" is coming for digital assets
Economist Nouriel Roubini "Doctor House" is not optimistic about the crypto industry. A leading economist says a "crypto apocalypse" is coming as the SEC tightens its grip on the digital asset space.
"Eventually the SEC will have [the money] to go after other cryptocurrency thieves and others," he wrote. "Cryptoapocalypse is coming!" According to Robini, the SEC needs more funding to fight abuses in the crypto industry.
Commercial property: Prices can be reduced up to 40%.
In the commercial real estate sector, Morgan Stanley Wealth Management, chief investment officer, expects prices to fall 40% from their peak since the 2008 financial crisis.
That's because of a number of factors, including work-from-home trends, high interest rates and tighter credit standards after the collapse of Silicon Valley banks, making it difficult for investors to refinance large debts.
Analysts at MS & Co. predicts CRE prices to fall as much as 40% from the trough of CRE prices during the Great Financial Crisis,” said Lisa Shalette of the Global Investment Committee in a weekly note.
"More than 50% of $2.9 trillion in commercial loans are due to be renegotiated within the next 24 months," he added.
Similarly, billionaire investor Leon Cooperman told CNBC that the sector will be the next victim of the banking crisis. "I think it will spread to commercial real estate as banks are reluctant to lend," Cooperman said. "This guy looks like he does now, [but] we will survive," he added.
Economy: America descends into "crime".
Looking at the US economy as a whole, one can see some exciting prospects. He raised an eyebrow at Rubini.
In an interview with Project Syndicate, he warned that the US economy is entering a "vicious cycle" – a vicious cycle of high inflation, increasing debt and financial instability that will engulf the country.
"A severe recession is the only thing that can bring inflation down and cause inflation, but the debt crisis will be even worse, leading to a deeper recession," he said. "Liquidity support cannot prevent this systemic downward spiral, so everyone must prepare for the coming debt crisis."
Robini also said that the US economy is moving towards the threat of the "Bermuda Triangle".
Meanwhile, veteran economist Luke Grohman warned that the US economy is facing "all kinds of problems" and that the Fed has only one bad choice when trying to curb inflation.
"The banking system is not the problem," he said. "G7 US Treasury sovereign debt is a balance of payments issue," Gromen said.
"Treasury in everything," Gromen continued, "is the guarantee of the whole system. So if we have problems with the treasury, we have problems with everything."