The S&P 500 could plunge nearly 50% if a brutal recession hits, a veteran technical analyst warns

• Stocks could plunge nearly 50% if a severe recession hits, Milton Berg warned.

• The veteran technical analyst cited investor complacency and further banking problems as risk factors.

• Berg expects the S&P 500 to fall below its level in October and approach its pandemic lows.

The S&P 500 could plunge nearly 50% if the U.S. economy sinks into a severe recession, a veteran technical analyst has warned.

“There is something very, very wrong with this market,” Milton Berg said online latest episode of the “Forward Guidance” podcast. Berg, who runs his own consulting firm and has previously worked as a commodities analyst and trader, fund manager and advisor to elite investors such as George Soros and Stanley Druckenmiller, cited a number of reasons why he is deeply concerned about the stock market’s prospects.

For one thing, Wall Street did it become too complacent about the risk of a recession, he said.

“The reality is that the economy has been weak and could become weaker,” he said. “We are more likely to have a recession now than at any time in the last two years.”

Most investors have moved on The collapse of Silicon Valley Bank this spring. Berg warned that other banks, pension funds, endowments and similar institutions have likely suffered significant losses in the value of their fixed income portfolios as interest rates have risen sharply over the past 18 months or so.

“SVB is just a canary in the coal mine, the tip of the iceberg,” he said.

Berg also pointed to a number of technical indicators that point to a lack of momentum, which is more consistent with a bear market rally than a bull market. In addition, he warned a rare decline in the money supply Early this year could be a “killer for stocks.”

“The market is on very, very weak footing,” he said. “This is what you see at market tops, where the liquidity that supposedly drives all markets higher… only a handful of stocks go up.”

The story goes on

The chart expert compared the stock market to a “drunk trying to walk a tightrope” where “any little change in the wind could knock you over.”

Berg said he expects a brutal recession and possibly a banking crisis could send the S&P 500 down more than 20% to below its October low – and even push it down 45% or more to its pandemic low of under 2,500 points could.

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