U.S. equity markets could be on the verge of a stock market crash and investors should begin rushing to the exits. At least, that’s the view of market strategist Komal Sri-Kumar.
“You’ve gone up a lot thanks to all the liquidity,” the president of Sri-Kumar Global Strategies told CNBC’s Squawk Box in an interview earlier this week. “If the Fed were to ever increase interest rates [I see] 20% plus in terms of the downside.” (Source: CNBC, August 6, 2015.)
Unlike the Federal Reserve that has reportedly said the interest rate will go up this year, Sri-Kumer doubts whether policymakers in the Fed will be able to hike the rate in September or December.
Sri-Kumar said that despite the aggressive money printing by central banks which have saved equity markets globally from inevitable crises, he believes that crashes have to happen.
“Eventually you can not defy gravity, it has to come down.”
When he was asked about alternatives in the event of a stock market crash, he foresees a bond market as an alternative while he outlined his prediction for bond yields. He expects a long-term move on the 10-year Treasury yield to 1.5% and short-term yield to be below two percent.