FABER: S&P COULD DECLINE 20% FROM HERE
Marc Faber is reiterating his negative equity market outlook in a phone interview with Bloomberg today. His comments mirror much of what the brilliant Jeremy Grantham said in his recent market outlook – the market is overbought, overvalued, and the real economy remains weak. He says the market could decline to S&P 920:
“The market has become overbought. There isn’t a meaningful improvement in the economy taking place. The economy may disappoint somewhat in the next few months. The statistics that are being published are very questionable. The economy has stabilized, but isn’t really expanding.”
“With unemployment staying at a relatively high level and with the revenue side being weak, I don’t think that corporate profits will be that great in 2010. Basically, the profits have been boosted by aggressive cost-cutting. The revenue side of corporations is weak.”
Faber goes on to explain that expectations are running hot now and could be well ahead of the fundamentals:
“This year, investors will never achieve returns as high as in 2009. Stocks are relatively high compared to the fundamentals.”
Faber views the recent downturn in financials as a shot across the market’s bow:
“Financials have already been quite weak. It’s kind of a warning sign for the market. They may weaken further, especially the banks. Also commodities-related stocks could weaken somewhat as commodity prices ease.”
But that doesn’t mean stocks will go down all year. Faber sees a Spring rebound:
“Usually March, April are seasonally strong months. We’ll get a rebound. In general, high-quality and large market capitalization stocks are reasonably priced considering you have zero interest-rates. As these markets go down, the high-quality, large-market-cap stocks will go down less than the smaller-cap stocks.”
In last week’s Barron’s Roundtable, Faber expressed his negative views on the full year outlook. He says he wouldn’t be shocked if the market closes lower on the year due to complacency:
“I wouldn’t be surprised if the market closes down this year. There is a lot of complacency among investors, and geopolitically, the world looks horrible.”
