Renowned financial commentator Marc Faber suggests that U.S. stocks have entered a “stealth bear market,” indicating a stock market crash could be imminent.
During an interview, the publisher of The Gloom, Boom & Doom Report told CNBC’s “Trading Nation.” on Monday that indices do not indicate the hidden crisis in the U.S. stock market. (Source: Marc Faber: Beware the ‘stealth bear market’, August 18, 2015.)
“Indices are close to a high, but if you look at the 12-month new highs and the 12-month new lows, even in the last two days when the market rallied, there are far more 12-month new lows than new highs,” Faber said.
The famed contrarian is well known for his bearish predication of stock markets. He has been warning investors for a potential stock market crash for the past few years, that hasn’t happened yet. However, this time could be different.
He particularly pointed out that transportation sector in the stock market could drag down the whole stock market and spark a stock market crash in 2016. Notably, the transportation S&P group is down more than 13% year to date.
“This weakness in the overall market will strike. Eventually we will end the year substantially lower,” he said.
Faber expects that a 40% drop in equity markets will occur in late 2015 and early 2016. He believes China’s economy is already heading toward a recession.
Faber suggests investors should buy gold, as gold prices tumbled to multi-year low. “I would recommend every investor to have some money outside the financial market and outside the financial sector,” Faber said. “I think that gold is still a very desirable asset, especially at this price.”