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Dow Jones Rally just a ‘Dead Cat Bounce,’: the US stock market could crash by 30%

Dow Jones Rally just a ‘Dead Cat Bounce,’: the US stock market could crash by 30%

The recent Dow Jones rally is a “dead cat bounce” because the stock market is going to tank and a recession will eventually cast a dark shadow over the US economy. That’s the bleak prediction of investment perma-bear David Tice, who previously managed the aptly-named Prudent Bear Fund. A dead cat bounce is a brief recovery from an extended bear market that’s followed by a prolonged downturn. Basically, that’s where Tice thinks the US stock market is right now. Looking ahead, Tice claims a 10 to 30 percent market plunge looms on the horizon, so Wall Street shouldn’t get overconfident because of the recent bull runs.

“This is a rally inside a bear market,” Tice told CNBC on February 7. “We believe we are now in a bear market. The 200-day moving average was crossed back in October…We could have something between a 10 percent and a 30 percent decline [this year].” Tice founded the Prudent Bear Fund in 1995 and sold it in 2008 to Federated Investors. He says despite the stock market’s recent rallies, he believes there’s a 50-50 chance of a recession this year.

Tice cited the disastrous monetary policies of the central banks, escalating corporate debt, and the economic slowdowns in Europe and Asia as the key drivers of the forthcoming recession. Tice says if the United States and China reach a trade deal, the Dow Jones may spike as much as 20 percent, but it will eventually come crashing down. Accordingly, he suggests that individual investors cut back on their equity exposure, saying the stock market is too risky right now. However, Tice is bullish on gold, saying everyone should buy some of it.

Dow Jones Rally Just a ‘Dead Cat Bounce,’ US Stock Market Could Crash 30%: David Tice, CCN, Feb 08

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