David Hunter Expects 2023 Market Melt-Up Followed By 2024 Economic
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Key Summary
David Hunter, Chief Contrarian Macro Strategist with Contrarian Macro Advisors, predicts a 2023 market melt-up followed by a severe global bust in 2024, which could be the worst since the 1930s.
He believes the current 41-year bull market, starting in 1982, is coming to an end, with a parabolic melt-up expected until around October 2023.
After that, he foresees a cyclical bear market and a massive shift towards industrial investments and commodities due to reshoring efforts and geopolitical concerns. Hunter also anticipates central banks pumping trillions of dollars in response to the global bust.
### Highlights -
- David Hunter predicts a 2023 market melt-up followed by a severe 2024 global bust.
2. The 41-year bull market is ending, leading to a parabolic melt-up until around October 2023. -
3. Reshoring efforts and geopolitical concerns will drive a shift towards industrial investments and commodities.
4. Central banks are expected to inject trillions of dollars to address the global bust.
Detailed Summary
- We are nearing the end of a 41-year bull market and expecting a massive melt-up followed by a global bust.
- The bull market started in 1982 and was driven by disinflation and lower interest rates.
- Melt ups are rare but we had one in 2020–2021, and we are expecting another one within three years.
2. The market rally is just the beginning of a new bull market.
- Investors and pundits are starting to realize this shift.
- There is still skepticism and hesitation among many investors.
- The melt-up is expected to happen by October.
- Timing the end of a 41-year move is difficult, but it is coming.
- The market could experience a consolidation or pullback at higher levels.
- Pullbacks are likely to be short-lived.
- There is an underlying lack of conviction in this rally.
- The fear of missing out is adding to the bullish sentiment.
- The Bears are important to fuel the bull market.
3. The next cycle doesn’t mean there won’t be good opportunities, as the market is based on human emotion and supply and demand.
- The market is composed of supply and demand, influenced by human nature and emotions.
- During a bear market, there is significant overhead resistance, resulting in a fight to break above it.
- Secular cycles have smaller cyclical cycles within them, presenting opportunities for investment.
- There has been a shift from an industrial economy to a service-oriented one over the past four decades.
- Due to underinvestment, industrial sectors have been affected, while services have become more prominent.
- The transition to a service-based economy has led to heavy industry being outsourced, resulting in job losses.
4. There is a movement towards reshoring and reducing dependence on China for supply.
- Companies are investing less in building new plant equipment around the world.
- There is a recognition that being dependent on other countries for supply is problematic geopolitically and militarily.
5. Industrial resurgence and reshoring of heavy industries worldwide, including the US
- Alternative energy and EVs promoted by the Biden Administration
- Potential return of steel mills and machine tools to the US
- Increased manufacturing of semiconductors to reduce reliance on Taiwan
- Growing demand for raw materials with limited supply
- Expected price increase due to tight supply and growing demand
- Investment constraints on fossil fuel exploration due to the shift towards alternative energy
6. Inflation is expected to rise due to high demand and limited supply of resources.
- Various commodities like crude oil, aluminum, and steel will see significant price increases.
- Wages will need to rise to keep up with the rising cost of living and goods.
- The Federal Reserve may be behind the curve in tightening monetary policy and may resort to massive stimulus measures.
- Debt levels may continue to increase in order to sustain the economy.
- Inflation and stimulus measures will create a cycle that could last for decades.
7. Melt up expected in the market, with potential for a surge of a thousand points
- Psychology suggests that as the market steepens, bullish sentiment will increase
- Investors need to be cautious and understand investment psychology
8. Being a contrarian investor is important to guard against market risks.
- At market tops, everyone is bullish, so it’s best to be bearish.
- At market bottoms, everyone is bearish, so it’s best to be bullish.
- Understanding psychology is crucial in investing.
- Betting against extreme market sentiment can lead to successful moves.
- Being a contrarian requires going against the crowd and thinking differently.
9. The bust in the market is expected to happen next year, while the bear market could start late this year.
- Massive leverage, with worldwide debt reaching 300 trillion, is a major cause of the upcoming bust.
- The value of derivatives has also increased significantly, going from virtually none in the mid-80s to quadrillions.
- Leverage enhances gains on the way up, but poses risks on the way down.
10. Massive leverage and fragility in the system caused by the pandemic and historic policy errors.
- The banks and General Motors were bailed out due to excessive leverage.
- The pandemic caused economic fragility and confusion.
- Massive amounts of money were pumped into the system, leading to a more fragile system.
- Global central banks made policy errors by staying too tight for too long.
- Leverage magnifies the impact of policy errors and increases the risk of a global bust.
- Awareness is crucial in preparing for the bear market and potential future bull markets.
11. Invest in government guaranteed debt, particularly treasury bonds, for financial stability.
- Government debt will be honored in this cycle.
- Companies with high levels of debt will struggle.
- FDIC-insured accounts are safe during this cycle.
- Commodities may experience a run-up, but be cautious of the bust period.
12. Commodity super cycle expected following the bust
- Silver forecasted to reach $60 pre-bust and potentially $500 by the end of the decade
- Gold predicted to rise to $3000 pre-bust and potentially $20,000 by 2030
- Anticipated deflationary bust with central banks likely to print money
- Risk of deflation emerging in 2024 but inflation expected by 2030
- Projected increase in global debt to around $450 trillion by the end of the decade
13. Prepare for an unsustainable future and reduce debts
- Housing market may drop during the bust with low interest rates but weak economy
- Real estate may not be a good inflation hedge; precious metals may perform better
- Commercial real estate will also be affected by the pandemic
14. Real estate and farmland may do well in the future due to changes in office space and a potential run-up in commodity prices
. Excess office space can be repurposed for housing or other purposes
- Industrial real estate may see growth
- Farmland is likely to appreciate in value due to expected increases in commodity prices
- Agriculture is a key industry that will always have demand
- The speaker expects a depression in the 2030s due to the build-up of excessive debt and the inability to sustain economic growth
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