The long bull market is over, a recession is en route, “monetary methadone” — Fed policy buttressing the economy and stock market — is ending and President Donald Trump, under pressures galore, could lead the U.S. into a new Middle East war, veteran trend detector Gerald Celente argues in an interview with ThinkAdvisor.
It’s “a time for caution,” warns the founder of the Trends Research Institute, taking, as ever, a global view.
Any upbeat news? Well, he predicts “relatively good earnings for 2019, considering.”
Other than that, the self-described “fearless teller of the truth,” prone to seeing the glass half-empty, spots nothing much to get optimistic about.
Celente predicted the financial crisis, the dot-com bust and the Black Monday market crash of 1987. But he also called the Trump market rally two weeks after the builder-reality TV show star was elected U.S. president.
But now that’s history. The main causes of all the current disruption are rising interest rates and, secondarily, declining oil prices — “not tariffs and trade wars,” Celente insists.
At its Dec. 18-19 meeting this week, the Central Bank is expected to hike interest rates for the fourth time this year.
A consultant to industry and government, Celente’s forecasts are rooted in his Globalnomic Methodology, which identifies trends in economics, business, technology, politics and more. These are published in the Trends Journal.
Skeptics call Celente’s predictions general and largely hunch-based.
In an interview with ThinkAdvisor in March of this year, the “political atheist,” as he calls himself, who owns the trademark “The Presidential Reality Show” — characterizing 2016 election candidates — heatedly referred to the Trump administration as “a freak show.”
ThinkAdvisor interviewed Celente, speaking from his office in Kingston, New York, on Dec. 11. He offered up his predictions for a “slumping economy” and a market correction that could well morph into a bear market.
The longtime real estate investor, who owns three pre-Revolutionary buildings listed in the National Register of Historic Places, maintains, however, that on a personal level, interest-rate hikes are failing to generate agita.
Here are excerpts from our conversation:
THINKADVISOR: What’s the top trend for 2019?
GERALD CELENTE: On the economic front, it’s the beginning of the end of the artificially propped-up equity and real estate markets globally. We’re already seeing a decline in real estate sales. It can’t take higher interest rates. They shot this thing up with negative and zero interest-rate policy and quantitative easing. We call that “monetary methadone.”
What will be the impact of “the beginning of the end”?
Slumping real estate sales, slumping retail, slumping auto sales and a market that has the potential to go into bear territory. It’s down almost 10% already, into correction territory. The slowdown has already started globally. Our economy got propped up better than [that of China and Japan, for example] because of Trump’s tax cuts that juiced more money into it. That’s the only reason.
Do you see a recession on the way?
We believe a Stage 1 recession is coming. The key indicator is the housing market, in which there’s already softness when you look at new mortgage applications and both new and existing home sales. Look at homebuilders’ stocks: They’re down about 30%.
What do you forecast for earnings in 2019?
They’re still going to be relatively strong, considering, but less than they were in 2018, when we saw 23% to 25% increases, on average. You won’t see that next year.
Many experts stress that the economy remains strong, but you’re saying there’s much to worry about.
Well, yes. Americans’ wages are barely keeping up with inflation. People can’t afford to buy homes. Everything is tilted toward the top. According to the Tax Policy Center, 82% of the Trump tax cuts went to the 1%. GDP figures aren’t accurate assessments of a nation’s economy. It’s bigger than that.
What positive effect on the economy did Trump’s corporate tax cuts bring?
We’re seeing almost $1 trillion worth of stock buybacks this year. That’s where the money went! That’s what [corporations] do.
Is the nearly 10-year-old bull market ending?
It ended in February, when the Fed was concerned about, of all things, rising wages, which meant higher inflation. The market has hit new highs since then, but the juice was taken out, and we’ve seen a lot of volatility.
What’s the biggest threat to the market now?
Interest rates. The higher interest rates go, the further economies and markets fall.
What does that mean to investors at the moment?