Global stocks may rise a bit further in the near term, but most countries will see drops of up to 20 percent this year, says Marc Faber, publisher of the Gloom, Boom & Doom Report.
And why will stocks fall?
“Earnings could disappoint, fiscal issues aren’t resolved,” he tells CNBC. “Tax increases and more spending will have a negative impact on the economy.”
Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.
In addition, “numerous countries are basket cases that will spill into social unrest and geopolitical tension,” Faber says.
To be sure, he sees Japan, Vietnam and China as exceptions to the downtrend, because their stocks have underperformed world markets so badly in the last four years.
As for bonds, they could rally for a little while, as they have hit oversold levels, Faber says.
“But we have seen the lows in interest rates,” he maintains. “I wouldn’t buy Treasurys. In time, the credit rating of the U.S. will deteriorate. Deficits aren’t going away anytime soon, and they could even go up if the economy weakens.”
Stocks finished at a five-year high Thursday, while the 10-year Treasury yield stood at 1.89 percent, up from July’s record low of 1.38 percent.
Byron Wien, vice chairman of Blackstone Advisory Partners, shares Faber’s bearishness on U.S. stocks.
He sees the Standard & Poor’s 500 Index dropping to 1,300 this year, depressed by falling profits. That would represent a 12 percent decline from Thursday’s close.
Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.
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