A near-term pullback, then the third bubble in 100 years is coming, says strategist.
Of the dozens of central bank meetings crammed into this week, the Federal Reserve is seen stealing the show with a tapering start and possible early rate-hike hints.
After the “worst inflation call in history” and its credibility shattered, Chair Jerome Powell will need to take the reins hard. So we’ll see if a potentially sterner Fed knocks the S&P 500, which glided to a new high on Friday despite nosebleed consumer prices, off the Santa rally path.
Investors should look to history for proof this can happen. The S&P 500 dropped nearly 20% in the third quarter of 1998 before the dot-com bubble burst in 1999-2000. A “late arriving” Fed tightening from the second-half of 1999 to the first half of the next year couldn’t stop it.
It maybe taking the S&P 500 toward the low 4,000s by the first quarter of next year.
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