Stocks, Crypto, Commercial Real Estate, Finance

• From shares to commercial property, several parts of the financial markets are on shaky ground.
• Experts have warned stocks could crash up to 50% and crypto faces imminent doom.
• Here are the 10 wildest predictions about asset prices and the economy in the last quarter.

From stocks and cryptocurrencies to commodities, a growing number of assets appear to be in choppy waters.

Jeremy Grantham has warned stocks could crash as much as 50% when an “alt bubble” bursts, while “Dr. Doom” economist Nouriel Roubini has sounded the alarm about an impending “crypto apocalypse” as the SEC tightens its grip on digital asset space.

While various headwinds are hitting assets, the Federal Reserve’s interest rate hikes appear to be weighing heavily on financial markets.

The Fed has raised benchmark interest rates to above 4.75% from near zero 12 months ago – the steepest jump in US borrowing costs since the 1980s – to curb rising inflation. Higher prices encourage saving over spending, which can dampen pace increases. But they can also dampen demand, drive down asset prices and increase the risk of a recession.

Here are the 10 wildest predictions about stocks, crypto, commercial real estate and the US economy in the last quarter from leading market commentators:

Stocks: US stocks could crash 50% – or rise 20%

Legendary investor Jeremy Grantham has topped the board for an extreme prediction about US stocks. The market historian has predicted that the S&P 500 could retain as much as 50% this year to around 2000, as an “alt bubble” bursts.

Grantham said prices of stocks, bonds, real estate, art and other investments rose to unsustainable heights during the COVID-19 pandemic.

Market experts Stephanie Pomboy and Larry McDonald echoed Grantham’s view – but with a less bearish prediction. While the pair expects shares to crash as much as 30%, McDonald said the plunge could happen in the next two months as higher interest rates stifle demand.

However, the bears aren’t the only ones turning heads with their eccentric predictions. Market bull Tom Lee of Fundstrat has predicted stocks will rise 20% this year, as historically declines have more often been followed by strong gains than flat performance.

Crypto: an ‘apocalypse’ is coming for digital assets

“Dr. Doom” economist Nouriel Roubini is not hopeful about the crypto industry. The famed economist said a “crypto apocalypse” is coming as the SEC cracks down on the digital asset space with tighter regulation.

“Finally, the SEC will have [funding] to go after all the other crypto and other bad guys,” he wrote. “The crypto apocalypse is coming!” Roubini said, referring to reports that the SEC is seeking additional funding to police wrongdoing in the crypto industry.

Commercial property: Prices can plunge 40% from the peak

Over in the commercial real estate sector, Morgan Stanley Wealth Management’s chief investment officer expects prices to drop as much as 40% from their peak in a worse crash than the 2008 financial crisis.

That’s due to a number of factors, including work-from-home trends, higher interest rates and tighter lending standards after the collapse of Silicon Valley Bank, making it harder for investors to refinance a mountain of looming debt.

“MS & Co. analysts predict a top-to-bottom CRE price decline of as much as 40%, worse than during the Great Financial Crisis,” Lisa Shalett said in the weekly note from the Global Investment Committee.

“More than 50% of the $2.9 trillion in commercial mortgages will have to be renegotiated over the next 24 months when new lending rates are likely to increase by 350 to 450 basis points,” she added.

Similarly, billionaire investor Leon Cooperman told CNBC that the sector would be the next victim of the banking crisis. “I think it will spread to commercial real estate as banks become more reluctant to lend,” Cooperman said. “It seems to be the whipping boy right now, [but] we will survive this,” he added.

Economy: US falls into a ‘judge loop’

When it comes to the overall US economy, there are some pretty striking forecasts out there. One that has raised eyebrows comes from Roubini.

In a Project Syndicate statement, he warned that the US economy is entering a “judgement loop” as a vicious cycle of high inflation, increased debt burdens and financial instability threatens to engulf the country.

“A severe recession is the only thing that can dampen price and wage growth, but that will make the debt crisis more severe, and that in turn will lead to an even deeper economic downturn,” he said. “Since liquidity support cannot prevent this systemic doom loop, everyone should prepare for the coming stagflationary debt crisis.”

Roubini has also said that the US economy is entering a “Bermuda Triangle” of risk.

Meanwhile, veteran economist Luke Gromen has warned that the US economy is facing an “everything problem” – and the Fed has only poor options to choose from as it tries to crush inflation by deflating the economy.

“It’s not a problem with the banking system,” he said. “It’s a US Treasury G7 sovereign debt, balance of payments problem,” Gromen said.

“Treasury underpins everything,” Gromen continued. “It’s the safety of the whole system. So if we’re going to have a fiscal problem, we want an alt problem.”