David Hunter Contrarian

Overview

David Hunter, the chief macro strategist at Contrarian Macro Advisors, has for some time predicted a final “melt-up” stage of the market cycle before markets experience a historic crash to rival 1929. This “melt-up” stage is now underway as markets recover from an initial sell-off caused by the coronavirus, Hunter said on the Contrarian Investor Podcast, adding that he did not and could not have predicted COVID-19.

About David Hunter

• David Hunter of Contrarian Macro Advisors rejoins the podcast to provide updates on his prediction that stock markets are in the final stage of a parabolic melt-up that will be followed by a global bust. Hunter’s initial targets for the S&P 500, Dow Industrials, and other U.S. stock market indexes have been breached, causing him to provide new, even more bullish, targets.
• The bust will likely start with a ‘second-quarter swoon’ next year, caused by the Federal Reserve's overreacting to inflation. The deflationary meltdown will then cause another overreaction by central banks and government fiscal policies. Not intended as investment advice.

Highlights

• Hunter’s new targets on the S&P, Dow, Nasdaq, and Russell 2000

• Oil and oil stocks have peaked for this cycle

• The bust should happen about mid-way through 2022 and result in oil prices back in the mid-$20s range

• The cycle will end because the Federal Reserve tightens interest rates due to inflationary pressures

• Central banks around the world are withdrawing quantitative easing and some have even started to adjust interest rates higher. This will affect things and force the Fed’s hand. Resolution of supply chain issues would increase the pressure;

• China will play a major role in the bust, though Evergrande is probably just the tip of the iceberg

• What happens after the bust is an unprecedented flow of liquidity. Yes, even more than COVID. There will be bank failures, though more in Europe and Asia than in the U.S.

• Central banks only have one tool to combat this, which is quantitative easing. They will be matched by fiscal stimulus. It will be “March of 2020 on steroids, basically. Multiple steroids”.

About Hunter's Prediction

• All major stock indices are trading at record highs. And valuations have never been more stretched. Market Cap to GDP (the famed "Buffet Indicator") has never been higher. Nor has the market's price-to-sales ratio. As analyst Sven Henrick puts it "everything has gone vertical". So, having correctly called the current melt-up, will Hunter's prediction of a 65-80% crash in prices this year also come true? Time will tell. But as extreme as that kind of drop may seem, history is on David's side. Whenever excessive debt has enabled market multiples to distort to unsustainably excessive heights -- which is what's happening now on an unprecedented level -- a painful correction to clear out the bad debt and malinvestment has always occurred. But despite his dire forecast, Hunter is more sanguine about what will follow.
• He predicts that those who preserve their capital through the coming crash will have the opportunity to deploy it at very advantageous terms as the next recovery begins. And like previous guests Jim Rogers and Steen Jakobsen, he sees a very bright future ahead for commodities and the companies that source, refine and deliver them to market. This is why now, more than ever, is the time to partner with a financial advisor who understands the nature of the risks and opportunities in play, can craft an appropriate portfolio strategy for you given your needs, and apply for sound risk management protection where appropriate.
• He believes that 2019 will be a year of extremes for the broader markets in that there will first be a melt-up and then later in the year a meltdown. There is a lot of excesses in the market, and inevitably there will be a big bear market. Many hedge funds are waiting for a retest of the bottom before redeploying their capital. However, as we approach the old highs, there will likely be a multi-month buying panic. He expects 3500+ on S&P this year and a final blow-off secular peak.
• There are a lot of risks out there, some that we have not seen in the history of markets. Derivatives build-up is uncharted territory. Once it starts unwinding it could be quick and fierce in the latter part of this year. A global deflationary bust is coming which will be severe. It will be a lot like 2008 but on steroids. This year will be one hell of a ride and not all of it fun.
• He expects the bond market will be quite bullish this year and perform quite well. However, he thinks an inflation period like the 1970s will begin in 2020. He cautions investors that some popular narratives will turn out to be entirely wrong.
• David is Chief Macro Strategist with Contrarian Macro Advisors. He is an investment professional with 25 years of investment management experience and 18 years as a sell-side strategist with strong expertise in macroeconomic analysis and portfolio management. His strong macro capabilities combined with a contrarian philosophy have allowed him to forecast economic cycles and spot market trends well ahead of the consensus. Intellectually honest, independent thinker comfortable with charting a course apart from the crowd. Accomplished stock picker and value-oriented portfolio manager.

About the show

• Tom welcomes back experienced investment professional David Hunter of Contrarian Macro Advisors to the show. David believes this cycle will end in a bust, something more significant than a deep recession but not a drawn-out depression. He anticipated a big run from the March lows and says we are poised for another big run soon into the top. He cautions that historic debt & derivative exposure will magnify market moves in both directions.
• Momentum, further stimulus, and a V-shaped second-half recovery will combine to drive the market to its final top. However, much damage has been done and money alone cannot sustain a recovery. David expects a second phase of the bust in 2021 including a global financial crisis and a huge involuntary debt liquidation cycle.

About Gold and Silver prediction:

• Gold and silver peaked in 2011, since then we’ve been in a long consolidation period. He is very bullish on gold, and he is calling for $1550 for gold and Silver to $26 by mid-year. The dollar is likely to roll over soon, and he expects the US dollar index to decline to around 86.
• He believes that 2019 will be a year of extremes for the broader markets in that there will first be a melt-up and then later in the year a meltdown. There is a lot of excesses in the market, and inevitably there will be a big bear market. Many hedge funds are waiting for a retest of the bottom before redeploying their capital. However, as we approach the old highs, there will likely be a multi-month buying panic. He expects 3500+ on S&P this year and a final blow-off secular peak.
• There are a lot of risks out there, some that we have not seen in the history of markets. Derivatives build-up is uncharted territory. Once it starts unwinding it could be quick and fierce in the latter part of this year. A global deflationary bust is coming which will be severe. It will be a lot like 2008 but on steroids. This year will be one hell of a ride and not all of it fun.
• He expects the bond market will be quite bullish this year and perform quite well. However, he thinks an inflation period like the 1970s will begin in 2020. He cautions investors that some popular narratives will turn out to be entirely wrong.

His further Predictions:

Talking Points From This Week’s Episode

• He predicts $1550 for gold and $26 for silver this year.
• This year will be one of the extremes.
• This year will be one hell of a ride and not all of it fun.
• David discusses his career and his focus in markets.
• He is bullish on bonds for the next year.

Conclusion

After stocks sold off last September (sound familiar?), Contrarian Macro Advisors’ David Hunter assured listeners the real stage of the melt-up in risk assets was still ahead. “This does not take away the melt-up scenario,” Hunter said of the September swoon, “In fact, this is kind of a fake-out, sell-off. I do think we’re going to regroup, and we’ll see the melt-up later this year.” Hunter in April predicted a dramatic rebound in risk assets. This was deemed outlandish in light of COVID but has largely come to pass — though a bit short of his original target (4000 for the S&P 500 by Labor Day). Now Hunter updates his view, with a rather shocking call: what we’ve seen so far was not the real “melt-up.” Most of the gains are still ahead, in fact, the coming months should see the final stage of a parabolic “melt-up.” Then things get ugly.

Questions and Answers

Who is David Hunter Macro?

• Image result for About contrarian macro advisors website
• David Hunter is Chief Macro Strategist with Contrarian Macro Advisors and has 48 years of successful experience in Financial M.New episode is life, as promised!

Who is David's investor?

David is Chief Macro Strategist with Contrarian Macro Advisors. He is an investment professional with 25 years of investment management experience and 21 years as a sell-side strategist with robust macroeconomic analysis and portfolio management expertise.

What are contrarian Macro Advisors?

Provide forecasts and input regarding the economy, equity markets, interest rates, commodities, precious metals, and currencies to both institutional and high net worth investors. Author of an investment letter entitled the Contrarian Value Advisor which is in its twentieth year of publication.