The Fed can’t stop a market meltdown, warns forecaster who called the 2008 housing bust

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'If we are on a recessionary course, either by the level of debt or the level of overconfidence in the economy, the Fed may not be able to prevent it even with multiple rate cuts,” this forecaster says

A “real compromise” on the U.S. debt ceiling, which many saw as a black swan for markets this autumn, plus a report that D.C. trade reps will head to Beijing for further talks next week, are keeping things in the green for Wednesday. That’s as we continue to work our way through a mountain of earnings and wait for next week’s Fed meeting.

Stack, whose firm manages over $3.1 billion, has a couple of claims to fame, among them calling the housing market collapse in 2008 and saving his clients from losses. That holds a big lesson for investors, he says. If the downturn takes back just half of the current bull market’s gains, “it could mean a loss of close to 40%,” he said.The market Dow Jones Industrial Average YMU19, +0.38% S&P 500 ESU19, +0.38% and Nasdaq NQU19, +0.43% futures are solidly higher. Gold GCQ19, -0.13% and oil US:CLQ19 are down, the U.S. dollar DXY, +0.38% is up. Europe stocks SXXP, +1.04% are nearing 7-month highs, with Asia markets ADOW, +0.12% also up.The buzz Earnings are rolling in from toy maker Hasbro HAS, +0.

“The last five times the Federal Reserve began cutting rates outside of recessions , the S&P 500 rose an average of 11.1% over the subsequent six months and 15.8% over the next year, as shown in the LPL Chart of the Day,” said “ride-the-wave” Lynch, in a note to clients.

 

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