Scott Minerd is the global chief investment officer at Guggenheim. He says that while there are still many places for stocks to go, it will be difficult to get back on its feet unless the Federal Reserve ends tightening their policy. Minerd has predicted that the stock market will experience a “summer in pain”, and he stated during CNBC’s SquawkBox, that stocks are expected to become an afterthought of the central banking while the focus on inflation. The Fed basically said that they are on autopilot, until they believe they have crushed inflation. Minerd, a Swiss economist speaking at the World Economic Forum in Davos said that the Fed doesn’t care about markets. Minerd added that it is “quite likely” the S & P 500 can drop to 40% below its all-time high, but if that decline happens in a way that isn’t “orderly,” then the Fed could step in. On Friday, the S & P 500 briefly traded more than 20% below its all-time high before closing 19% off the mark. Minerd described the Fed’s rate increases and the economy like cars driving at different speeds. Guggenheim said that the Fed is likely to move into restrictive policy territory soon. Minerd said the Fed would “just overdo” it. The technology sector, which has been in decline since December last year, is the one that’s already fallen more than 20%. Minerd stated that these stocks might be smart investments based upon historical valuations but are not likely to rebound soon. When they are reasonably valued, markets don’t typically value them. Minerd explained that overshooting is a common characteristic of markets. As a sign the market is not at its lowest, Minerd pointed to Cboe Volatility Index (which was close to 29 Monday). Minerd stated that this measure must be at least 40 in order to indicate “real panic” or the end of the selling wave.
