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Aug. 3, 2019, 12:01 p.m. EDT · CORRECTED

The Fed can’t stop a market meltdown, warns forecaster who called the 2008 housing bust

Critical information for the U.S. trading day

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By Barbara Kollmeyer, MarketWatch

A previous version of this report incorrectly stated the value of Stack Financial Management’s assets under management. The correct figure is $1.3 billion. The story has been corrected.


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But not all-powerful...

The positives for this stock market are inching out of the woodwork.

A “real compromise” on the federal debt ceiling, which many saw as a black swan for markets this autumn, plus a report that U.S. trade reps will head to Beijing for further talks next week, are keeping things in the green for Wednesday. That’s as we continue to work our way through a mountain of earnings and wait for next week’s Fed meeting. Ahead of that

No doubt, the latter could be a watershed moment for investors, but expectations over the Fed’s ability to fix all that ails the economy and markets may be running a little too hot, warns our call of the day , from James Stack, president of Stack Financial Management and owner of InvesTech Research.

In an interview with MarketWatch, he suggests we ask this: Will the reversal in Fed policy that began last year “restimulate economic growth or simply reinflate investor exuberance?” That’s as he notes the last six months have delivered the strongest stock gains in any six-month period in 20 years.

Stack, whose firm manages over $1.3 billion, has several claims to fame, among them calling the housing-market collapse in 2008 and saving his clients from resulting losses. That holds a big lesson for investors, he says.

“The bottom line message from past history is that if we are on a recessionary course, either by the level of debt or the level of overconfidence in the economy, the Fed may not be able to prevent it even with multiple rate cuts,” he said.

Stack thinks we could be two or three years away from a bear market and “one of those great buying opportunities.” For now, he says watch the warning signs that are already creeping up — weakness in small-cap stocks via the Russell 2000 and in transportation names, softness in the manufacturing sector.

If the downturn takes back just half of the current bull market’s gains, “it could mean a loss of close to 40%,” he said.

Opinion: Investors are heavily borrowing to buy stocks — what does that mean for the bull market?

The market

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.19%  , S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0020% and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.07%   are solidly higher. Goldand oilare down, the U.S. dollar /zigman2/quotes/210598269/delayed DXY -0.05% is up. Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.61% are nearing 7-month highs, with Asia markets /zigman2/quotes/211618636/realtime XX:ADOW +0.47% also up.

Read: Oil prices not reflecting severity of Iran crisis as tensions escalate in Strait of Hormuz

The buzz

Earnings are in from toy maker Hasbro /zigman2/quotes/201249319/composite HAS +1.06% , biotech group Biogen /zigman2/quotes/201531540/composite BIIB +0.19% /zigman2/quotes/201531540/composite BIIB +0.19% , Harley-Davidson /zigman2/quotes/207565294/composite HOG +0.46% , Coca-Cola /zigman2/quotes/209159848/composite KO +0.53% , conglomerate United Tech /zigman2/quotes/203237915/composite UTX -0.09% , airline JetBlue /zigman2/quotes/207639051/composite JBLU -0.93% and defense group Lockheed /zigman2/quotes/200691238/composite LMT -0.91%

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,094.79
-52.29 -0.19%
Volume: 216.44M
Sept. 19, 2019 5:17p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.22
-0.05 -0.05%
Volume: 0.00
Sept. 20, 2019 1:38a
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/zigman2/quotes/210599654/delayed
XX : STOXX
391.80
+2.39 +0.61%
Volume: 0.00
Sept. 19, 2019 5:50p
loading...
/zigman2/quotes/211618636/realtime
XX : Dow Jones Indices
3,214.11
+15.04 +0.47%
Volume: 0.00
Sept. 20, 2019 1:48a
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/zigman2/quotes/201249319/composite
US : U.S.: Nasdaq
$ 120.92
+1.27 +1.06%
Volume: 1.04M
Sept. 19, 2019 4:00p
P/E Ratio
49.38
Dividend Yield
2.25%
Market Cap
$15.26 billion
Rev. per Employee
$848,083
loading...
/zigman2/quotes/201531540/composite
US : U.S.: Nasdaq
$ 235.62
+0.45 +0.19%
Volume: 1.26M
Sept. 19, 2019 4:00p
P/E Ratio
8.77
Dividend Yield
N/A
Market Cap
$43.46 billion
Rev. per Employee
$1.55M
loading...
/zigman2/quotes/201531540/composite
US : U.S.: Nasdaq
$ 235.62
+0.45 +0.19%
Volume: 1.26M
Sept. 19, 2019 4:00p
P/E Ratio
8.77
Dividend Yield
N/A
Market Cap
$43.46 billion
Rev. per Employee
$1.55M
loading...
/zigman2/quotes/207565294/composite
US : U.S.: NYSE
$ 34.79
+0.16 +0.46%
Volume: 1.71M
Sept. 19, 2019 6:30p
P/E Ratio
12.82
Dividend Yield
4.31%
Market Cap
$5.45 billion
Rev. per Employee
$1.08M
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/zigman2/quotes/209159848/composite
US : U.S.: NYSE
$ 54.52
+0.29 +0.53%
Volume: 8.09M
Sept. 19, 2019 6:30p
P/E Ratio
33.34
Dividend Yield
2.93%
Market Cap
$233.13 billion
Rev. per Employee
$506,342
loading...
/zigman2/quotes/203237915/composite
US : U.S.: NYSE
$ 137.53
-0.13 -0.09%
Volume: 2.19M
Sept. 19, 2019 6:30p
P/E Ratio
22.44
Dividend Yield
2.14%
Market Cap
$118.68 billion
Rev. per Employee
$277,021
loading...
/zigman2/quotes/207639051/composite
US : U.S.: Nasdaq
$ 17.11
-0.16 -0.93%
Volume: 4.87M
Sept. 19, 2019 4:00p
P/E Ratio
11.89
Dividend Yield
N/A
Market Cap
$5.07 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 393.43
-3.61 -0.91%
Volume: 1.05M
Sept. 19, 2019 6:30p
P/E Ratio
19.17
Dividend Yield
2.24%
Market Cap
$111.10 billion
Rev. per Employee
$512,019
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