Stocks May Tumble As Global Recession, Earnings Slump Hits: Boockvar

• Investors are thrilled about the Fed’s interest-rate cuts and inflation slowing down.
• Peter Boockvar suggested that stocks could still be hurt by a global economic recession and weak earnings.
• Bleakley Advisory’s chief warned that home prices could fall 20% in certain US housing markets.

Investors rejoice signs of slower inflation and the possibility that the Federal Reserve will change from increasing interest rates to decreasing them. Peter Boockvar says they are overlooking the possible damage to stocks if there is a global economic downturn or a decline in earnings.

Bleakley Advisory’s chief investment said to CNBC that the market is riding on the hope and belief of inflation rolling over. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average each gained nearly 2% last week, reversing a small portion of their sharp declines this year.

The Fed raised rates from almost zero to around 4.4% to stop inflation, which has risen to new 40-year highs. Higher rates discourage spending, borrowing, and hiring — and that means they tend to weigh on asset prices, employment, and economic growth.

Boockvar stated that the prospect of rates rising and falling earlier than anticipated is “creating a lot more relief, since we know inflation has been the main pain point in markets this year,” Boockvar.

Investors seem to forget about any concern about the US’s rate hikes and the possible damage to corporate profits if there is a global recession next year, he said.

He said, “That’s what the markets have to do next.” “That’s the next hurdle to overcome and the next leg for bear markets.”

Bleakley chief John Bleakley expects a drop of global demand to hurt companies’ earnings, and pull down stock prices. This is in addition to the boost they get from a positive rate outlook and less volatile inflation.

Boockvar has been warning about rate hikes and the state of the US economy for some time. Recently, he warned that house prices could fall 20% in some of the country’s most desirable real-estate markets. Higher rates have caused mortgage rates to skyrocket this year, making homes less affordable.

A housing slowdown could have negative effects on consumer spending, economic growth and consumption, due to the immense size and importance of this sector.

Learn more “No buyers in sight”: Senior economists predict that home prices will drop by 25% because of the favorable supply-demand dynamics in the housing market.