The "Holocaust" staged in the US stock market last night is nothing more than an appetizer to the bloody storm that will take place in the coming months.

Scott Minerd, chief investment officer of asset management giant Guggenheim, said in an interview with Market Watch on Wednesday:

Investors are expected to experience "a terrible summer and autumn" and enter the second half of the year.The Nasdaq composite index will collapse, down 75% from its peak on November 19 last year (down about 28% now), while the s & p 500 is down 45% from its peak on January 3, 2022 (down 18% now).

Minerd points out that the market now looks a lot like the bursting of the dotcom bubble (the 1999-2000 tech stock crash).

Jeremy Grantham, a legendary investor and co-founder and chief strategist at GMO who successfully predicted two market crashes, holds a similar view.

The collapse of US stocks is ostensibly similar to the bursting of the Internet bubble in 2000.The s & p 500 is expected to continue to fall, or 40 per cent from its peak, to levels not seen since the bear market in march 2020.

At the same time, Grantham points out that there are some differences between this decline and 2000. The bubble in 2000 was only in the stock market, the bond market performed well, the yield was amazing, housing prices were low, and commodities performed well.Compared with today, the year 2000 is a "paradise".Now the conflict between Russia and Ukraine has broken out, energy and food prices are high, the real estate market is a mess, and the bond market is the worst performance in years.

He thinks the recession is likely to turn into the 1970s, with slowing economic growth and persistently high inflation.

The Fed put option is no longer available

The main cause of pessimism among Wall Street bosses is the Fed's tightening policy, which has made it clear that its goal is to continue to raise interest rates, although that could lead to turmoil in U.S. stocks and other markets, Minerd said.

Minerd said:

We are all well aware of the factThat is, there are no Fed put options.(the so-called Fed put option means that the Fed will quickly step in to save the stock market when the stock market plummets.)

Powell, chairman of the Federal Reserve, also seems to be trying to persuade investors not to hope that the Fed will rescue the market, in an interview with the Wall Street Journal on Tuesday.He said he would continue to raise interest rates and would not stop until inflation fell, warning that the process could cause some pain.
Mined said he believed the Fed would continue to raise interest rates "until they see a clear break in the inflation trend" and said the Fed was likely to raise interest rates above neutral levels.

Earlier this month, the Fed raised the federal funds rate to a target range of 0.75% per cent and said it expected to raise interest rates by another 50 basis points in each of the next two meetings. Us inflation was 8.3 per cent in April, well above the Fed's target rate of 2 per cent, according to the Labor Department.

Curbing inflation may require raising interest rates to 8%

Recently, the Hoover Institute hosted a meeting in which a number of participants, including Jason Furman, former White House chief economist, expectedThe fed needs to raise interest rates to 3.5% Mul 8% to reach neutral levels.

Previously, Joseph Carson, the former chief economist of Lianbo, expressed a similar view that "policymakers need to raise interest rates above the inflation peak every time to suppress the inflation cycle." That means the Fed will keep raising interest rates until the economy or markets change.

Minerd says:

The Fed seems to have "no concern about the persistence of the bear market". If that's the case.We could have a pretty serious sell-off.The downturn may bring the Fed to a standstill, but interest rate hikes are unlikely to slow until serious damage is done.

"as long as the sell-off remains relatively orderly, US stocks will not suddenly collapse and the Fed will raise interest rates above inflation." Minerd added.

Some Wall Street professionals, including Wells Fargo & Co CEO Charlie Scharf, saidIn the context of radical interest rate hikes, it is difficult to avoid recessionMined agrees. He pointed out:

We will have a "painful summer", and by October, the market may hit bottom.

At present, the Fed is moving in the direction of excessive tightening, and employment is showing weakness. Given the "conflicting process" between the Fed and the cooling economy, long-term interest rates are likely to be close to their peak.