Markets at the Start of a More Significant Downturn: Marc Faber
Managing Digital Editor, CNBC International
U.S. stocks are at the start of a more meaningful correction and possibly even a bear market, Marc Faber, the editor and publisher of the Gloom, Boom and Doom report told CNBC in Singapore on Saturday, though he added that further money printing would likely limit the decline in the S&P 500.
“The technical underpinnings of the market have been a disaster in the last couple of weeks,” Faber said on the sidelines of the Maybank Invest Asia conference. “The number of new highs have declined, the volume has been poor, insider sales just hit a record.”
Faber said the weakness in economically sensitive stocks such as mining and industrial goods was particularly “disturbing.”
Known as a contrarian, Faber's views are at odds with those of Byron Wien who told CNBC last week the bull market in stocks would continue throughout the year.
According to Faber, Friday's jobs report is another sign the economic recovery remains subpar and he believes the S&P 500 chart pattern is also signalling worrying signs.
The index made a head-and-shoulder pattern last year, then dropped to its October low before rebounding through the necklines to a new high, he said.
“I’m not saying that I would rely in my life only on technical analysis, but in the text books of technical analysis… (this pattern) is actually viewed as a very negative development."
Faber warned of a bear market in stocks on August 3 last year, when the S&P 500 was at 1254. While the market didn’t enter bear territory (defined as a 20 percent drop over a couple of months), Faber’s warning seemed prescient. The S&P 500 declined around 14 percent in the weeks after he spoke to an intra-day low of 1074 in October.
This time Faber is much more cautious about calling a bear market, pointing out merely that it could happen. He says he isn’t short the S&P 500 currently because he’s convinced there will be another round of quantitative easing by the Federal Reserve, which could mitigate the declines. Still, he said he was holding a bit more cash and less in terms of equities.
Faber, who's been a gold bull for much of the last decade and keeps around a quarter of his assets in precious metals has been bearish on bullion since September last year after it “overshot” and hit a record high of $1921.
On Saturday, he told CNBC, gold prices could fall further after they declined 1.8 percent last week.
“I still feel we are in a correction period and again like in equities, it’s a correction that is somewhat more serious."