Usually posts in the Watchlist category have a target date, but this time I made an exception because the prediction is so profound.
According to Edwards, Société Générale’s global strategist and prominent perma-bear, the S&P 500 could falls as much as 75%, from the recent peak of 2,100 to 550.
If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550. I will repeat that: If I am right, the S&P would fall to 550, a 75% decline from the recent 2100 peak.
He further noted that in the previous bear markets, it has taken four to six recessions to shake off the weak sentiment, as shown in the chart below. In other words, we’ve only had two recessions in this current cycle, and the bear market has not yet completed.