Marc Faber’s Forecast for the U.S. Stock Market Is Frightening

The U.S. stock market is in free fall.

A little over a handful of days into 2016 and the Dow Jones Industrial Average DJIA, -2.32% has lost 5.2% of its value for the year, the S&P 500 index SPX, -2.37% has dropped about 5%, and the Nasdaq Composite Index COMP, -3.03% has tumbled nearly 6.4%. See: S&P 500, Dow industrials see worst ever start to new year.

But perma-bear Marc Faber says it could be a lot worse. The Swiss investor who publishes the Gloom, Boom & Doom Report told MarketWatch that the stock-market downturn could result in the S&P 500 hitting lows not seen in five years.

Faber’s dour forecast is that the S&P 500, which ended Thursday trading at 1,943, amid a China-fueled global market rout, could plunge to its 2011 low. According to FactSet data, that would be 1,099.23, set that October. Faber referred to that outcome, a more-than-40% plunge in the broad stock-market benchmark, as his “medium bearish” scenario. His most bearish prognostication envisages the S&P 500 falling back to its 2009 nadir, which FactSet data put at 676.53.

But the real kicker is that Faber isn’t pointing to problems in China as the direct cause for the market’s march into bear-market territory. “The main factor is diminishing global liquidity because of the decline in oil prices,” he told MarketWatch.

MarketWatch

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.