US stocks could plunge up to 30% within the next two months as surging interest rates squeeze consumers and jaded investors swap equities for bonds, Larry McDonald has warned.on Wednesday that his set of 21 systemic risk indicators"point to one of the highest probabilities of a crash in the stock market looking out 60 days."
Higher rates lift borrowing costs and encourage saving over spending, which can help cool the pace of price increases. However, they can also pull down asset prices, increase unemployment, and temper consumer spending, raising the risk of a recession. "The withdrawal of capital from the middle-class families is so spectacular," McDonald said."The middle-class families are getting hammered here, and so the consumer pressure's violent."
People who invested in the S&P 500 two years ago have made virtually no gains, he noted. They might increasingly view a risk-free return of over 5% from government bonds as appealing, he argued.
So says a guy who moved his investments to cash. He is waiting to buy at the bottom.
He is the one piling up cash to buy stock during that crash .
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