The Dow Jones Industrial Average will drop 20 percent or more this year, Citi FX Technicals Global Head Tom Fitzpatrick predicts.
Fitzpatrick based his prediction on the Dow's past performance.
"The equity market looks great, up 120 percent if you compare it to 2009," he said. "But if you compare it to 1999, we're unchanged, and we're below the 2000-07 highs.
Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.
"The economy probably barely grew 1 percent in the fourth quarter," he added. "We have a situation where it's looking like it could be quite sluggish with the tax dynamics and the debt dynamics in the first quarter."
He also predicts gold will reach $2,400 an ounce, unemployment claims will increase and Brent crude will reach an all-time high.
Financial markets may look good now, but not when compared to past levels, he said.
"To us, it really feels like we're in the stratosphere without any oxygen left."
Most other forecasters are much more sanguine
An informal New York Times survey indicates that most investment experts are cautiously optimistic about the economy and the stock market.
For instance, Bill Miller, manager of the Legg Mason Capital Management Opportunity Trust, who accurately predicted the Standard & Poor’s 500 last year, told The Times that stocks will do well, due to rising earnings, strong free cash flow, solid profit margins, low inflation and attractive valuation relative to bonds.
On the other hand, Byron Wien, a vice chairman at Blackstone, who correctly predicted the S&P 500 would end 2012 over 1400, says the S&P will end 2013 without a major gain, according to The Times.
“I don’t expect the stock market to do much this year,” he told The Times. “Most analysts are forecasting returns of 10 percent or more, but I think earnings could be down for the year, which would make it hard for the market to gain that much.”
Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.
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