A pedestrian passes in front of a statue of a bull in the Wall Street area of New York City.
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Expect a significant drop in equities over the next three months as macroeconomic growth gauges peak this summer, Deutsche Bank’s US equity strategist said.
Binky Chadha warned clients in a note published Monday that he predicts “significant consolidation” in the stock markets in a range between a 6% and 10% decline as economic growth levels off.
He and Deutsche Bank measure cyclical macroeconomic growth with the Institute of Supply Management’s production index.
ISM growth “typically peaks around a year (10-11 months) after the recession has ended, right where we appear to be,” Chadha wrote. Historically, “the S&P 500 sold around peak growth rates with a median of -8.4%, but even periods when the ISM flattened rather than declined there was a median of -5.9%.”