Investors should be prepared for further market declines for the rest of the year.
That was the message from two panel speakers at the 2022 Fintwit Conference hosted by Benzinga and Lupton Capital at the ARIA Resort & Casino in Las Vegas.
The presentation, titled "Navigating The Markets, Portfolio Tips and Market Outlook," featured Eric Basmajian, founder and editor at EPB Macro Research, and Louis Stevens, creator of Beating The Market by L.A. Stevens Investments.
Recession Indicators: Basmajian said the markets have been dealing with declining long-term economic trends along with decelerating cyclical trends that kicked in at the end of 2021. He said it's becoming increasingly unlikely that a major economic downturn will be avoided.
“At face value, the odds of a recession are rising each and every day,” he said. “When you add Fed tightening monetary policy into decelerating economic growth, it makes the probability of a soft landing a lot lower than it would be otherwise.”
Basmajian said the Fed is attempting to lower inflation while not causing additional harm to an economy that is already slowing down. He added that the central bank is facing “sort of an impossible task.”
The EPB Macro Research founder noted that if the Fed executes rate increases at the pace currently expected by the markets, the likelihood of a soft landing is “close to zero.”
He said the real question investors want to know is "when will the Fed pivot?"
'The Worst Bond Market Since 1842': Meanwhile, Stevens echoed the dire predictions, saying there are clear signs that a bigger downturn is likely ahead.
“Portions of the market indicate that we are already in a recession, portions of the market indicate we’re in at least the initial stages of a liquidity crisis,” Stevens said.
He noted that it's not just stocks that are flashing a warning sign. “We’re in the worst bond market since 1842,” he said.
“The current bond sell-off... we haven’t seen such a dramatic sell-off since the signing of the Treaty of Versailles to conclude World War I.”
Stevens told conference attendees that the sub-$20 billion market cap companies he analyzes have already priced in a “violent recession.”
When it comes to how the Fed will respond if the market declines intensify, he said that, "ultimately, we have no idea what this centrally planned economic system has in store."
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