There could also be no escape from recession.
The most recent reports on housing and manufacturing, in response to investor Peter Boockvar, suggest it’s rapidly spreading to other parts of the economy.
“People aren’t being sensitive enough to this economic slowdown and what it’ll be mean for corporate earnings and profit margins,” the Bleakley Advisory Group chief investment officer told CNBC’s “Fast Money” on Monday.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped into negative territory in August. That is the eight month in a row builder confidence fell. In a news release, NAHB chief economist Robert Dietz said, “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession.”
Boockvar predicted a housing collapse almost exactly a yr ago on CNBC’s “Trading Nation.” He warned the Federal Reserve was stoking one other real estate price bubble that may wipe out home equity.
An extended-time Fed critic, he expects the central bank to make a serious error because it raises rates of interest and tightens monetary policy to battle inflation.
“Should you have a look at previous rate climbing cycles, it was lower and lower levels of a Fed funds rate that began to interrupt things,” said Boockvar. “But each successive rate climbing cycle ended before the previous one because something broke. So, now we start moving into dangerous territory where things are vulnerable to breaking.”
There was a second discouraging economic report on Monday. The Recent York Fed’s Empire State Manufacturing Survey for August plunged by 42 points. It was tied to a collapse in recent orders and shipments. Boockvar called it an “ugly report” in a note.
Yet the key indexes began the week within the green. The Dow saw its fourth positive day in a row. The S&P 500 and the tech-heavy Nasdaq closed higher for the third time in 4 sessions.
But Boockvar suggests the rally is on thin ice since it’s early in a downturn. He lists three stages of a bear market and suggests investors are in denial.
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“I can argue that we’re really just starting… part number two where growth is slowing and we’re starting to see the impact on earnings, particularly profit margins,” he said. “This has a ways to go to work through door number two.”
But Boockvar believes investors can still become profitable. On this environment, he recommends value names over momentum tech.
“Value continues to be going to well outperform growth,” said Boockvar, a CNBC contributor. “Valuations in growth stocks, even with these declines, are still quite expensive where there are still plenty of forgotten value names that have already got low expectations embedded in them.”
He also likes commodity stocks, including precious metals, natural gas and oil.
“I’m still pretty bullish on commodities generally, acknowledging the pullback due to worries concerning the demand side,” Boockvar said. “But [I’m] still very bullish on the supply-side challenges.”
On Monday, WTI crude fell almost 3% to shut at $89.41 a barrel — after hitting its lowest level since Feb. 3 earlier within the day.