Market prognosticator Gary Shilling expects the S&P 500 to return to its doldrums, warning the recession could last into 2025

Gary Shilling.Bloomberg TV

  • Gary Shearing says investors should expect lower stock market returns going forward.

  • The legendary forecaster cited slowing economic growth, lofty valuations and fading speculation.

  • Merrill Lynch’s first chief economist says a recession seems likely and could last until 2025.

Stock market investors face decades of disappointment, with a recession this year that could last into 2025, a legendary market forecaster has warned.

The S&P 500 has gained an average of 12.3% per year (including dividends) since its bottom in July 1982, but future returns are likely to be lower, Gary Shilling wrote in the February Insight newsletter.

Merrill Lynch’s first chief economist founded his own advisory and advisory firm in 1978 to Correct call There have been several major market shifts over the past 50 years.

In his latest outlook, Shilling predicted stocks would be weighed down by slower real economic growth, reflecting modest gains in the labor force and productivity and an aging population leading to higher savings and lower spending. Inflation will affect the nominal increase in stock prices.

Additionally, Shilling stressed that stocks are overvalued relative to corporate profits, with the S&P 500’s trailing 12-month price-to-earnings ratio of 24.8 well above the long-term average of 17.3. market and predict that this situation will disappear over time.

“A key reason why stock prices have risen and are likely to be subdued in the coming years is the demise of widespread speculation,” he said. “Despite FTX’s collapse and accusations of fraud from its founder and head Sam Bankman-Fried, many continue to flock to into securities that have little substance.”

Shilling accused Bitcoin and other cryptocurrencies of distracting investors and eroding productivity. He said the post-epidemic decline in Wall Street’s “fear gauge”, the Chicago Board Options Exchange Volatility Index, signals “investor complacency and a shift from fear to greed, as well as rising stock prices.”

He also pointed to a declining ratio of short puts to bullish calls, excessive analyst earnings forecasts and a high concentration of investor money in the “big seven” stocks as evidence of over-optimism and trouble ahead.

On the economic front, Shilling argued that labor hoarding has delayed wage cuts and layoffs as employers are reluctant to lay off workers after struggling to find staff in recent years: “As a result, the overall economy is weak – or more likely – a recession It will probably continue into next year.”

It is worth noting that the shilling warn Some Second-rate The S&P 500 may have plummeted 30% or more in recent months, and a recession is imminent, if not yet underway. However, benchmark stock indexes have soared to record highs and the U.S. economy is in trouble. Stable growth of 3.3% in season four.

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