Guggenheim CIO Sees Trouble for Stocks, Bonds

February 22nd, 2016 by

Guggenheim Partners LLC is one of the largest investment and financial management companies in the world. The company’s chief investment officer (CIO), Scott Minerd, has recently made a habit of accurate predictions when it comes to key market movements.

What’s interesting, to say the least, is when someone from inside Wall St actually has something frank and revealing to say about a bear market. By and large, people who work in the financial industry have a vested interest in talking up the markets in one form or another.

Source: Fox Business

Source: Fox Business

Recently, Minerd has publicly expressed his (and, by extension, his company’s) expectation that both the U.S. stock market is likely to fall further than it has already this year. Meanwhile, Guggenheim believes this could push even more investors into U.S. Treasurys. Medium- to long-term Treasury notes are often seen as the “safest bet” when it comes to paper financial assets.

Mr. Minerd is identified as a Managing Partner on Guggenheim’s executive leadership listing on its corporate website.

Although he made no direct mention of gold or precious metals, Minerd’s comments are a ringing endorsement for safe haven assets when you take his predictions to their logical conclusion.

Losses for Nasdaq, Treasurys

The Nasdaq stock index, one of the three main indices based in the U.S., differs from its two counterparts (the Dow Jones Industrial Average and the Standard & Poor’s 500) in being technology-heavy. Most of the biggest companies in the technology sector are listed on the Nasdaq.

Propelled by the growth of tech giants like Facebook, Amazon, Netflix, Google (collectively dubbed FANG), the Nasdaq rode a wave of exuberance to all-time highs above 5,200 last year. Some called this the “dot-com bubble 2.0” after the index lost more than 1,000 points from last summer to the start of this year.

Nasdaq 1-year price chart. Source: Google Finance

Nasdaq 1-year price chart. Source: Google Finance

Minerd is predicting that the index will continue to fall as low as 3,800—which would be its lowest level since late in 2013.

Perhaps even more surprising, he predicts that the benchmark 10-year U.S. Treasury note will see huge demand, pushing yields as low as 1%. The 10-year T-note currently has a yield of 1.75%.

In a conversation with Reuters, Minerd explained his reasoning:

“According to technical analysis, the current target bottom for the 10-year Treasury note is 28 basis points [0.28%] . . . That may seem like voodoo, but technical analysis provided key insight to our macroeconomic team a year ago when we called for oil to hit $25 per barrel back when it was trading at $60.”

Source: Investopedia

Source: Investopedia

He bases his predictions on technical analyses (using sophisticated charts and formulas to spot trends); technical methods should not be taken as gospel, but it’s hard to argue with his results. He is also entrusted with managing about $240 billion worth of assets for Guggenheim.

It’s almost always more reassuring (and a boost to the speaker’s credibility) when someone from inside Wall St makes the case that stocks cannot simply got up forever. Because the people in high places in the financial world have a conflict of interest—they want to sell people their investment products, and want those people to believe they will make money—they rarely make public declarations about potential losses, even when their expertise and analysis leads them to that conclusion. Minerd is simply being honest.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.