Hold on to your hats if you believe the world coming out of Guggenheim investments recently. One of the chiefs over there has stated that they foresee a forty percent plunge in stocks to be paired with a recession that could make the situation even worse. They do not foresee much of a way out of this one either. Worst of all, they believe that the Federal Reserve will step in to try to fix the situation but in doing so will only make it worse.
Scott Minerd posted these thoughts in a letter to clients according to CNBC. He said that as far as timing goes for this pending disaster, he expects that late 2019 to early 2020 is when we are talking about. He also expects a steep increase in corporate bond defaults during that time period as well. Without the stock market or bonds working for you, where exactly are you supposed to go for value during a time like that? Well, that is the million dollar question.
There has been a clash in policy agendas between the White House and Congress versus the Federal Reserve. The Fed has been trying to establish a more regulated and controlled period of growth while the White House and Congress have pushed for growth and tax cuts in an aggressive way. They want to see results in terms of growth immediately. Meanwhile, the Federal Reserve is trying to cool things down a bit before there is some big bubble burst.
That is the clash of ideas that is happening right now. It is also part of the reason why Guggenheim believes that we are not going to be able to easily escape from the predicament that we find ourselves in right now. They believe that this will be the spring board to the kind of market decline that they are calling for.
The other issue that Guggenheim sees unfold is the massive amount of corporate debt that has exploded in recent years. It is currently at an all-time record high. That amount is nearly nine trillion dollars at the moment. That is something that cannot be overlooked if you are serious about how you study economics and the markets. Guggenheim believes that it is going to be a problem going forward. They see a lot of defaults from corporations in the near future. That could cause problems for bond holders and also make the situation in the stock market even worse.