Chris Sheridan: The year 2016 will see a number of important events: the US presidential election, the Summer Olympics, and, according to a growing number of market analysts, another financial crisis.
Why? What’s so special about 2016? That’s the interesting thing—they all have different reasons.
First, I have to admit, I didn’t realize this pattern until it reached a certain level of blatant obviousness when the always chipper Paul Farrell of MarketWatch recently wrote a piece titled, “Great Crash of 2016, third $10 trillion loss this century.”
Paul isn’t an analyst…or, at least, from his MarketWatch columns, he certainly doesn’t seem as one. So why does he target this date then? Answer: Jeremy Grantham. If you trace back through his archive you’ll find another amusing piece titled, “The Great Obama Bull Market will roar till 2016,” where he quotes Grantham, “one of America’s more accurate forecasters,” as saying that the stock market “is likely to be strong…in the following 18 months up to the next election…then around the election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse, depending on what new ammunition the Fed can dig up.”
After Grantham there’s Lance Roberts, who writes in “The Coming Market Meltup and 2016 Recession” that projections of the Fed’s balance sheet along with a ten-year cycle support the idea “of a market ‘meltup’ before the next big correction in 2016.” You can read his analysis if you’re interested.
Then, we have global investment strategist James Kostohryz who also sees a bubble developing over the next 1-2 years…and then a likely crash. In a recent Financial Sense Newshour interview (click here for audio) he explains that all the money the Fed has injected will remain in the financial system long after their most recent program of QE3 ends, which, in addition to the economy finally starting to recover, still record low interest rates, and less risk-aversion by investors, will lead to another bubble in stocks that, given the 1-2 year time frame, lands us again right around 2016.
What about money managers and strategists outside the US—what are they predicting? One very well-known guest to Financial Sense, CNBC, Bloomberg and elsewhere is Puru Saxena, publisher of Money Matters, who is based out of Hong Kong. In his March issue titled, “The Trend Is Your Friend,” Puru writes:
“Going forward, we suspect that as long as monetary policy remains accommodative, housing markets will continue to heal and this will be good for the developed world. At some point in the future, credit growth will accelerate, prices will rise sharply and central banks will start tightening monetary policy. When that happens, credit creation will diminish, business activity will slow down and we will get the next recession… Although we do not possess a crystal ball and cannot guarantee when central banks will start raising interest rates; we suspect that the yield curve will not invert for at least another 2-3 years; thus the ongoing uptrend in stocks may continue until 2016-2017.”
Then, there’s our recent interview with the widely followed metals and market analyst Avi Gilburt.