Milken Institute
US equities could drop 15% by the end of October, driven lower by concern over the delta variant of COVID-19 and its impact on global growth, while cryptocurrencies could continue to face pressure, according to Guggenheim's Scott Minerd.
The chief investment officer told Bloomberg on Wednesday that September and October are likely to be "very rough" months for stocks.
"Maybe a pullback of 15% or slightly more," he said, adding that investors could get back into buying by the end of autumn.
Stock prices and bond yields recently fell sharply as growth fears sparked by the fast-spreading delta variant dented some of the market optimism. The Dow Jones slumped 2.1% at the start of the week in its biggest one-day drop since October, but stocks have slowly been clawing back gains.
That said, the benchmark US stock indices have all hit record highs this month and are not trading far below those levels. The S&P 500 hit a record 4,393.68 on July 14 and closed about 1% below that level on Tuesday.
Wall Street can expect a rise in volatility over the next few months, as the Federal Reserve could taper its asset purchases sooner than expected if pressure grows for the central bank to start to normalize interest rates, according to Minerd. He expects Treasury yields to decline by as much as 60 basis points if markets believe the economy will weaken. A drop of that size would take the 10-year Treasury note yield to its lowest since October.
For cryptocurrencies, July was the third consecutive month of negative returns. Minerd expects them to stay challenged in the near-term.
Minerd reiterated a $15,000 price prediction for bitcoin, a 53% decline from Thursday's price of $32,190, and said "a lot of this stuff is just junk." Still, he called ether a more viable currency than bitcoin.
"I think there's still more air to come out," he said. "The standard bear market for bitcoin has been an 80% retracement, and given all the uncertainty and the new competition from new coins, I think there's more downside to go."
Buying bitcoin anytime soon isn't a good idea, according to him. He has previously compared cryptocurrencies to the 17th century tulip bubble. After pulling back significantly, Minerd has said he expects bitcoin to eventually rise to as much as $600,000 per coin.
