A Recession Is Imminent, According To Albert Edwards

Albert Edwards of SocGen (Societe Generale SA (ADR) SCGLY has held a bearish view for quite some time and on Friday released a new note to clients, which is merely a follow-up from previous bearish reports.

Edwards said in early January that the S&P 500 index could collapse by 75 percent to the 550 level. He followed up in April by saying that a "tidal wave" of corporate default is looming and this will propel the US into a recession. As far back as 2013, Edwards predicted that the price of gold will surge to $10,000 an ounce, the S&P 500 index will bottom at around the 450 level and 10-year U.S. Treasury yields will trade at sub-1 percent.

Why Is This Time Different?

Edwards has been expecting an "Ice Age" for stocks since 2013, which would consist of a multi-decade downturn for stocks and financial assets. The "Ice Age" is also characterized by "lower lows and lower highs for nominal economic quantities," driving a "re-rating of government bonds and the de-rating of equities."

Related Link: SocGen: Recession Is "Virtually Inevitable"

"In the aftermath of the latest, weaker than expected, nonfarm payroll data, economists are certainly more worried," Business Insider quoted Edwards as saying in his latest research note. "The excellent folks at Advisor Perspectives highlight the Fed’s Labour Market Conditions Index as suggesting a recession is imminent (the cumulative peak is an average of nine months ahead of the start of recession and we are now four months beyond a peak."

"The secular bear market only ends when cyclically adjusted valuation measures reach rock bottom (such as the Shiller PE on the bottom line)," he added in his note. "Each successive recession sees huge downturns, usually to new lower lows of both prices and valuations. That is why we reiterated our view early this year that in the coming recession the S&P will bottom at 550, a 75 percent decline from current levels."

Bottom line, the equity market is heading into a "cold, dark, and damp" space, and only time will tell how accurate his forecast is.