A pedestrian passes a statue of a bull in the Wall Street area of New York City.
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A significant decline in equities is expected in the next three months, as macroeconomic growth measures peak this summer, according to Deutsche Bank’s top US equities strategist.
Binky Chadha warned clients in a note published on Monday that it predicted a “significant consolidation” in stock markets, between a decline of 6% and 10% as economic growth slowed.
He and Deutsche Bank measure cyclical macroeconomic growth with the manufacturing index of the Institute of Supply Management.
ISM growth usually reaches a peak of one year (10-11 months) after the recession ends, exactly at the point we appear to be, ‘Chadha wrote. Historically, “the S&P 500 sold out -8.4% around growth peaks, but even deliveries that flattened the ISM rather than declined saw a median selling price of -5.9%.”