Stocks and real estate are not done crashing, don't expect all-time highs for another 10 years - Chris Vermeulen
(Kitco News) - The equity markets, along with real estate, may not recover to their previous all-time highs for at least a decade, according to Chris Vermeulen, chief market strategist of TheTechnicalTraders.com.
"The scenario that we've had in the equities market has been very extreme. A hedge fund manager came out on Market Watch and he kind of said what I was thinking which is...he thinks there's going to be a decade-long bear market in equities. It may be not a decade long bear market, but we could have a very long time before the market recovers and gets back to where we are," Vermeulen told David Lin, Anchor for Kitco News.
This sideways market action would be reminiscent of the NASDAQ post-2001, when following the Dot Com Bubble bust, the tech sector didn't recover to its 2000 high for another 17 years, Vermeulen said.
Vermeulen noted that in the prior bear markets of 2000 and 2008, both times saw the S&P 500 and NASDAQ indices correcting more than 50%.
By comparison, the S&P 500's and NASDAQ's current bear cycles only accumulated losses of 21% and 32%, respectively, from their highs in late 2021, but more downside action can be expected after another "complacency rally", he said.
"We've had a huge blow-off phase [in the NASDAQ], all kinds of manipulation [from the Federal Reserve] going on, we've had this first big sell-off on the NASDAQ chart, and really on all indices. But what's interesting is if we take a look over here there was this kind of little pause, this bear flag move where it traded sideways to higher, and that's a complacency type of move and we had the initial big sell-off in the NASDAQ, which is where we are now," he said. "I think we can go into a sideways rally into the end of the year, and as the market kind of rebounds, and I think eventually we're going to start a much bigger market correction that can take a lot longer."
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Residential housing sales have been slowing down, and since real estate markets typically take a while to catch up to other risk assets like the equities indices, the worst is still yet to come, Vermeulen said.
"I think the [real estate market] has had a huge blow-off phase," he said. "There's a guy...Christopher Whalen, who just talked about 10% plus mortgage rates next year. It's jus like the bond markets, if yields go up, bonds go down. If mortgage rates go up, home prices come down."
Vermeluen is not selling his current real estate holdings, noting that they're a retirement nest egg, and long-term real estate should still realize more capital appreciation.
For Vermeulen's outlook on gold and gold miners, watch the video above.
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