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Sept. 18, 2019, 4:02 p.m. EDT

Stocks could drop 20% after an October disappointment, strategist warns

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By Shawn Langlois, MarketWatch


CNBC
Blackstone warns of potential market hit.

‘The markets are set up for a disappointment. They’re going to have to re-rate their expectations. You’ve got a market that this year has traded off of hopes for coordinated global central bank easing. That’s the only reason why we’re up 20% year to date. We’re certainly not there because of fundamentals.’

That’s Joseph Zidle, Blackstone’s /zigman2/quotes/203156858/composite BX +2.11% chief investment strategist, explaining to CNBC on Wednesday why stocks could be headed for a beatdown.

He’s looking for the Fed to cut rates by a quarter point on Wednesday, and then again in October, but then that’s it. Zidle warned that could rattle a market “demanding upwards of 100 basis points” on top of what we got in July.

He said he sees Fed Chief Powell wrestling with inflation at home while also looking to align U.S. rates with the rest of the world.

“The markets are saying to the Fed, ‘Think globally. Rates around the world are so low, you’ve got to cut our rates lower.’ But the Fed is going to have to respond to local data,” Zidle explained. “They are going to have to act locally which I think is going to constrain them from giving the market all it wants.”

Zidle’s end-of-year target for the S&P is at 2,875, a decline of about 4% from current levels. He does, however, see potential downside. “Any bull market can produce 10-20% pullbacks. We saw that in the fourth quarter of last year,” he said. “I wouldn’t rule out something that’s on the order of 10-20%.”

The Dow /zigman2/quotes/210598065/realtime DJIA +0.09% bounced into positive territory on Wednesday, closing just barely in positive territory, along with the S&P /zigman2/quotes/210599714/realtime SPX +0.28% . The Nasdaq /zigman2/quotes/210598365/realtime COMP +0.40% , however, ended in the red.

Watch the full interview:

/zigman2/quotes/203156858/composite
US : U.S.: NYSE
$ 47.80
+0.99 +2.11%
Volume: 4.26M
Oct. 17, 2019 6:30p
P/E Ratio
26.82
Dividend Yield
4.33%
Market Cap
$55.54 billion
Rev. per Employee
$2.41M
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,025.88
+23.90 +0.09%
Volume: 225.06M
Oct. 17, 2019 5:02p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,997.95
+8.26 +0.28%
Volume: 1.62B
Oct. 17, 2019 5:02p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,156.85
+32.67 +0.40%
Volume: 1.68M
Oct. 17, 2019 5:16p
loading...

Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.

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