Everyone’s favorite libertarian, Ron Paul, has taken an even darker outlook on the U.S. economy. In July, Paul said the markets could fall 25% and gold could soar 50% by October. Barring any real positive U.S. economic news, Paul now thinks a day of reckoning is here for the U.S. stock market and said a 50% pullback is conceivable.
The U.S. economy is not nearly as strong as Wall Street is telling investors. This means a massive stock market correction could hit Wall Street and Main Street as soon as October. At least that’s according to Ron Paul, the former Republican congressman, presidential candidate, and medical doctor. (Source: “Ron Paul: 50% stock market plunge ‘conceivable,’ but it’s not President Trump’s fault,” CNBC, August 18, 2017.)
Again, Paul has not ratcheted up his gloomy outlook on the U.S. economy because of a raft of negative U.S. economic data. Rather, it’s the absence of anything to cheer about that makes him think the U.S. stocks market could crash by as much as 50%.
“A 50% pullback is conceivable. I don’t believe it’s 10 years off. I don’t even believe it’s a year off.”
What would that do to U.S. stocks? That would bring the S&P 500 down to around 1,215, levels not seen since December 2011. The Dow Jones Industrial Average would tumble close to 10,846, erasing six years of gains.
Ron Paul isn’t blaming President Trump for the eventual stock market crash. “It’s all man-made. It’s not the fault of Donald Trump. If the market crashes tomorrow and we have a great depression, he didn’t do it in six months. It took more like six or 10 years to cause all of these problems.” (Source: Ibid.)
“All of these problems” of course being, in part, years and years of stock market manipulation at the hands of the Federal Reserve and artificially low interest rates. With savings depleted and barely-there rates, the only place for income-starved investors and retirees to turn was the stock market.
It didn’t matter if stocks reported solid or weak results, investors sent stock prices and valuations higher and higher. Despite a raft of terrible economic data rolling in over the last number of years, companies propped up their share prices by cutting costs and aggressive stock repurchase programs.
Eventually, investors will want to see that a company can report consistent earnings and revenue growth. One, two, or three quarters won’t do.
In addition to years and years of barely-there economic growth and an earnings recession, stocks could plunge 50% because of the escalating dysfunction in Washington. Gridlock, bipartisan squabbles, and a growing political divide in Washington also means Trump will not be able to slash regulations and implement his proposed tax cuts. All of which could further impede growth on Wall Street.
“I see the foundation of our system built on sand, and a big wind comes along to blow it down,” Paul said.