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August 17, 2022 at 02:25 PM
The stock market’s “puke point” — the bear market bottom — doesn’t seem imminent, economist Gary Shilling suggests in a recent report, writing that it’s premature to conclude investors have already priced in a recession.
The puke point marks the moment when stockholders who can be shaken out are indeed shaken out, he explains in his latest Insight report. ”They’ve regurgitated their last equity and swear never to buy another one. … That’s when the bear market bottom is reached and a new bull market commences,” Shilling said.
“There are many signs that the puke point lies far ahead,” he added. “Some of those who earlier denied the possibility of a recession now say that if it occurs, it will be mild and it is already discounted in lower stock prices. They believe the Fed will cut interest rates next year, and we agree — but only after the central bank realizes it has precipitated a recession.”
While his firm released the commentary late last month, the economist referenced it in a tweet Monday, saying, “I don’t need the reported two straight quarters of negative real #GDP to tell me the US #economy is already in, or at least close to, a business downturn.”
In the report, he said: “Hopes that the bear market in stocks has largely anticipated a recession are no doubt premature. Stock devotees are far from reaching the puke point and capitulating.”
