This year is shaping up exactly like the 2000 dot-com bubble crash and stocks will drop a further 40%, a former Goldman Sachs manager has warned.
April produced the best monthly gains for the Dow Jones Industrial Average DJIA, +1.90% and S&P 500 SPX, +1.68% in 82 years — after the worst first quarter in history — and May has so far got off to a bad start.
Former Goldman Sachs analyst Will Meade said the rest of the year looked even worse for stocks, predicting a 40% drop over the rest of 2020.
Meade said the year was lining up to be “exactly like” the 2000 dot com bubble crash.
“The Nasdaq in 2000 did a similar bear market bounce as stocks this year — dropped 40%, then bounced 42% off the bottom retracing 61.8% of its drop. It stalled then fell 43%, making a new low four months later,” Meade said. He added that the presidential election on the horizon, as it was in 2000, creates further risk and uncertainty, while retail participation and leverage was near the 2000 bubble level.
Finally, the fact Warren Buffett was hoarding a “record amount of cash,” as he did in 2000, was another sign of what’s to come, he said.
Beyond his reasoning for the call, Meade offered some drastic advice to Americans, who he said should be building up as big a savings buffer as possible to weather a job loss or reduced income.
“Downsize your house if you can. With mortgage rates at record lows and with summer upon us, we’ll likely get a quick ‘dead cat bounce’ in the housing market.
“Anything liquid and of value, sell now: art, coins, handbags, stamps, extra cars.” He added that people should go to cash in retirement accounts if possible and reduce non essential spending, such as dining out.
This year is lining up exactly like the 2000 dot-com bubble crash — stocks will drop 40% from here, former Goldman manager says
It’s Monday and stocks are falling again, as U.S.-China tensions ramp up and states begin to emerge from lockdown.
www.marketwatch.com
