A pedestrian passes in front of a bull statue in the Wall Street area of New York.
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Expect a significant downturn in stocks over the next three months as macroeconomic growth indicators peak this summer, according to Deutsche Bank’s chief US equity strategist.
Binky Chadha warned customers in a note published on Monday that he predicts “significant consolidation” in the stock markets in the range of a 6% to 10% decline as economic growth stabilizes.
He and Deutsche Bank measure cyclical macroeconomic growth with the Institute of Supply Management manufacturing index.
ISM growth “typically peaks around a year (10-11 months) after the recession ends, exactly where we would appear to be,” Chadha wrote. Historically, “the S&P 500 has sold around growth peaks at an average of -8.4%, but even episodes that saw ISM flatten out rather than fall, saw an average sale of -5.9%.”