Experts: Massive Summer Stock-Market Plunge Coming Again

Monday, 04 Jun 2012 09:25 AM

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Stocks are poised to tank this summer on growing fears the U.S. is headed for a recession amid the dismal employment data, experts say.

Even if the U.S. does avoid a downturn, the possibilities of such are growing, which will send equities plunging.

"In the last two summers, the final nail in the equities coffin, the thing that pushed it was a double dip scare. We do think the market is going to increase expectations of that in the coming week,” Barry Knapp, head of U.S. equity portfolio strategy at Barclays, tells CNBC, referring to a double-dip recession, when the economy sinks into a downturn, recovers a bit and then contracts anew.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Stocks are already off 10 percent from earlier 2012 highs, and talk the Federal Reserve will stimulate the economy via monetary easing measures is growing in wake of May's dreadful jobs report, which showed the economy added a net 69,000 nonfarm payrolls.

Monetary stimulus, technically known as quantitative easing, sees the Federal Reserve taking unorthodox steps to spur growth such as buying bonds held by banks to flood the economy with liquidity to encourage hiring.

"There’s no question the economy is still struggling and still struggling a lot … I’m starting to fear summer," says Diane Swonk, chief economist at Mesirow Financial, CNBC adds.

"I remember a time when I was a kid and I liked summer. It’s now gotten to where in the last five years, summer is the time everybody falls apart, and we’ve gotten into the pattern, particularly in the last three years where we start out optimistic about the economy and then it falls apart."

Other market watchers note the U.S. may repeat its 2010 and 2011 performance by growing well at first and stalling in the second half of the year, but will avoid a contraction.

"I don't think the slowdown will be any more consequential than the past two years," said John Ryding, a former Federal Reserve researcher who is chief economist at RDQ Economics LLC in New York, according to Bloomberg.

Household debts are down, banks are healthy and corporate earnings continue to weather the storm.

"There are positives out there in the economy. We'll avoid a recession," Ryding says.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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