By Joseph Adinolfi
Guggenheim Partners Global Chief Investment Officer Scott Minerd has rejoined Wall Street’s growing chorus of equity bears, as he noted last week during an interview with MarketWatch.
And as stocks looked set to extend their latest rebound on Monday, Minerd added another wrinkle to his cautious outlook by telling CNBC during an interview from the Alpine redoubt of Davos that he believes real estate and fine art will outperform equities over the next five years.
If given $10,000 and a five-year investing horizon, Minerd said he would rather put the money to work in real estate or fine art instead of equities.
He also shared some downright apocalyptic thoughts about crypto, warning that the digital assets could experience an even more brutal wash out, with bitcoin /zigman2/quotes/31322028/realtime BTCUSD 0.00% potentially sliding all the way back to $8,000.
“When you break below $30,000 consistently, $8,000 is the ultimatebottom, so I think we have a lot more room to the downside, especiallywith the Fed being restrictive,” Minerd said.
The problem with crypto is that most coins are “junk” or “garbage.”
Although he believes that both bitcoin and ethereum will ultimately survive the downturn, Minerd said crypto likely hasn’t found the right “prototype” yet to help drive more widespread adoption.
To put all this in context, a decline all the way to $8,000 for bitcoin would represent a pullback of 70% from approximately $30,000 per coin, bitcoin’s price on Monday.
Adding an important caveat to his criticisms, Minerd compared the current market paradigm for crypto to the early dot-com days, claiming that it would be difficult to correctly foresee which coins will be the winners.
Circling back to stocks, Minerd expects the Federal Reserve will continue hiking interest rates on “autopilot,” creating more pressure for equities. The only thing that might force the central bank to step back in and backstop markets would be if the decline got out of hand —- say, if stocks were to fall 20% in the span of a week or two.
Stocks were bouncing on Monday after the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05% logged its eight straight weekly declines, its longest such streak since 1932. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06% was up nearly 2% after skirting a close Friday in bear-market territory after it briefly traded below the threshold that would mark a 20% pullback from the large-cap benchmark’s Jan. 3 record finish.
While the blistering pace of the selloff since the start of 2022 has brought stocks —- particularly tech stocks —- closer to fair value, typically, markets “tend to overshoot” before starting to reverse, Minerd said. Therefore, it’s likely the selling won’t stop until the Cboe Volatility Index /zigman2/quotes/210598281/delayed VIX +7.12% , or VIX, moves back above 40 or even 50.
“Historically we need to be north of 40 closer to 50 to get a real bottom. Until we see some real panic we’re not going to see a real bottom. Bear markets don’t end at fair value —- they tend to overshoot.”