Photo: Fox Business News
Michael Pento of Pento Portfolio Strategies and previously of Euro Pacific Capital thinks markets will dive this summer.He believes that the bulls are underestimating how deeply intertwined the global economies are.
He wrote for King World News:
The reason for the perma-bulls’ optimism is based on the fact that America doesn’t have a strong manufacturing base. In fact, manufacturing now represents just 10% of our once diversified and vibrant economy. Wall Street is now hoping that since we don’t make many things to export to Europe, our GDP won’t suffer a significant decline at all…
What investors have conveniently overlooked is the fact that 40% of S&P500 earnings are derived from foreign economies. And the seventeen countries that make up the Eurozone have collapsed into recession. That wouldn’t be so bad if EU (17) wasn’t the second biggest economy on the planet…
But don’t rely on China to supplant falling demand from the Eurozone economies. China’s economy is still driven by exports, which represent about 40% of their GDP. The problem here is that China’s largest customers are the U.S., Japan and Europe. The U.S. is mired in stagflation, while Japan’s growth is anemic at best and the E.U. is in recession…
But it might not be all bad news for the markets:
The Fed, ECB and BOJ will most likely launch further quantitative easing later this year in an effort to combat falling stock prices. If that is the case, precious metals and equities will be the primary beneficiary.
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