The S&P 500 will crash 30% by December as spending slumps, profits shrink, and banking problems mount, markets guru Larry McDonald warns
to crash nearly 30% by December, as a triple-whammy of shrinking corporate profits, less government spending, and fractures in the financial system deal a staggering blow to stocks, Larry McDonald has warned.
"Internally we have crashed," he told Insider."What hasn't crashed - where I'm wrong - is the capital moved out of these crash spots and into hiding spots." . That means the index's almost double-digit gain since January has been driven by a relatively small number of stocks.McDonald is a former trader and the author of"A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers." He drew several parallels between the current market setup, and the backdrop before his former employer collapsed in 2008 and touched off the Global Financial Crisis.
For example, McDonald singled out the nearly 30% drop in MetLife stock this year, and noted large insurers don't usually lag the market by a huge amount"unless something very big is happening." He suggested the decline reflects concerns about the company's vast commercial real-estate portfolio, which has likely come under pressure from higher interest rates and tighter credit.
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