Gary Shilling: 8 Market, Economic Predictions for Year-End and Beyond

1. A major stock drop is likely.

There are many reasons to think stocks will be hit, according to Shilling, who said equities were “very expensive relative to bonds.” The economist, who has been predicting a significant stock slide from the market’s January 2022 peak, sees the S&P 500 declining 20% to 25% from its current level, probably in the next six months.

“It’s not a very pretty picture but it’s one that I think we need to be prepared for,” he said. “I don't see a lot of reason for optimism.”

Shilling said he doesn’t understand the strength in the S&P 500 starting last fall, lasting until recently — “somehow this conviction that there really isn’t much of a problem” — although stockholders don’t seem bothered, he said.

Similarly, he said he doesn’t understand what’s been happening with the high-priced big-tech growth stocks, i.e. the NYSE FANG+ index. He called it unrealistic, especially given what’s been happening with interest rates.

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