(asiaMARKETS.com) - A Wall Street veteran of more than 40 years has issued a warning to investors – but it’s not the type of warning most would expect in the current market environment.
Macro strategist, David Hunter has warned investors that they should be prepared for an historic market rally, the type of rally described as a “melt-up”.
“A melt-up is just ahead. It’s likely to be the biggest, steepest rally in the post WWII era & will be a broad rally with both growth & value, large & small caps participating,” says Hunter.
So is it growth stock or value stocks? Well, according to Hunter the melt up will be completely indiscriminate.
“Commodities, industrials, tech including FAANG, semis & ARKK, autos, airlines, steel, financials & miners will all play,” he says.
What is a melt-up?
Melt-ups occur when there is an extraordinary aggressive upwards movement in the stock market, with no clear fundamental economic reason for the price action. Irrational exuberance by investors is usually the cause of a melt up. Melt ups are often followed by market ‘meltdowns’ and historically have occurred during volatile periods in global markets.
The classic example of a modern-day melt-up is the U.S. market form late 1998 to early 2000.
It began after a period of market carnage in 1997 and early 1998 – there was the Asian Financial Crisis, the Russian Ruble was crushed and the collapse of US hedge fund, LTCM had many fearing a global economic crisis was imminent.
But within weeks of the LTCM collapse, positive sentiment roared back and U.S. stocks ‘melted up’ with the NASDAQ gaining around 200% in an 18 months period to the beginning of 2000 (then came the tech wreck).
There have been various other melt-up events in the history of global markets, but the one Hunter says will take place in the “very near” future will be unlike anything any of us have seen before.
“We’re at or very near major inflection points for bonds, stocks, rates & the dollar. The metals & miners are poised for big upside as well.
“Everyone is worried about inflation & Fed tightening. Sentiment is extremely bearish on both stocks & bonds.”
David Hunter’s melt-up predictions
In a series of Twitter posts, Hunter who is the Chief Macro Strategist at Contrarian Macro Advisors, hasn’t been shy to talk figures.
While he hasn’t provided a time-frame, here’s what he expects to result from the imminent melt-up event.
- S&P to 6000
- Nasdaq to 20,000
- DJIA 45000
