Marc Faber: Stocks Could Fall 20% From Peak
Stock prices could fall by as much as 20 percent from recent highs thanks to President Barack Obama’s re-election, which opens the door to policies hostile to the business community, said Marc Faber, author of the Gloom, Boom & Doom report.
An Obama victory will allow the president’s healthcare overhaul law take effect, which will herald in the arrival of tax hikes on investment income in the near future.
Meanwhile at the end of this year, tax hikes are scheduled to kick in at the same time as cuts to government spending, a combo known as a fiscal cliff that could send the country sliding into a recession next year if left unchecked by Congress.
Expect a compromise to involve some tax hikes given that Democrats control the White House and the Senate.
“Technically the market was weak already for a couple of months and we are in a downtrend and Mr. Obama’s economic policies are obviously not very good for an economic expansion, and I think businesses — small-business men and even medium-sized businesses — will be very reluctant to hire people given Obamacare,” Faber told Fox Business Network.
“I think what people are also concerned about are increases in capital gains taxes, so they are selling shares ahead of the implementation of these taxes.”
Many investors were expecting a win by Republican candidate Mitt Romney and were caught off guard when Obama won, which helped fuel a post-election selloff in the stock market, Faber added.
“He is not good for business and so stocks are selling off because the stock market is expecting a hard time for corporate profits and essentially economic weakness, which is reflected in a strong bond market and weak stock market,” Faber said.
“I think from the peak, the market will drop at least 20 percent. I think we will revisit the lows of June, the 1,266 on the S&P.”
The S&P 500 is currently trading around 1,390.
Market participants, meanwhile, caution that uncertainty leading up to the cliff will roil markets before, or if, a deal is cut to stave off disaster.
“The re-election of President Obama removes one uncertainty” for investors, economists Paul Ashworth and Paul Dales of Capital Economics wrote in an analysis, according to The Christian Science Monitor.
“But they are none the wiser about if, how and when Congress will deal with the colossal tightening in fiscal policy scheduled to occur early next year.”