Global equity markets are set for precipitous declines mid-way through next year, according to leading technical analyst Charles Nenner, head of research at the Charles Nenner Research Centre in Amsterdam.
Nenner has been dubbed the “cycle guru”, because he uses technical analysis to predict future market moves. He has developed a huge following among hedge funds, investment bankers and brokers because of his strong track record in predicting major market moves. Nenner attracted a lot of attention in 2007 when he warned of trouble ahead for the US market. In February 2009, he predicted a major rally would begin “in a few weeks” that would push the S&P index up over 1000.
In an interview with Business Spectator, Nenner forecasts that next year will be a tale of two halves: “I still think we’ll see a little bit more positivity in equity markets until the middle of 2012, then they’ll really be in trouble.”
This bleak outlook for global equity markets is consistent with his economic outlook. Europe, he says, is now definitely in recession, while the US never came out of recession. Even worse, he says, the decision by the European authorities to conduct stress tests on Europe’s banks has triggered a credit crunch at exactly the wrong time.
“I think we’re heading for a depression,” he said. We’re going to have deflation starting in Europe.”
Not surprisingly, Nenner is also predicting the eventual collapse of the eurozone: “It’s going to happen, but not right now. The people who put together the European Union and the euro had no clue what they were doing. But the politicians will try to keep it going as long as they’re in power, because no one wants to be remembered as the ones who presided over its collapse.
“I think they’ll be able to keep it going for another one or two years. They’d like keep it going for another three or four years, but they don’t have the money to do that.”
And Nenner warns that the Chinese economy will not escape the woes afflicting the global economy. He predicts that the Chinese government will move to stimulate the Chinese economy, which will provide a boost to global equity markets early next year. But, he warns, the Chinese are still heavily dependent on selling goods to the US and Europe, and the Chinese banks face serious difficulties with problem loans.
But Nenner is much more optimistic when it comes to the Australian economy. He believes that the local currency is set for a big move higher in coming months, which could push it up by about 15%. At the same time, he says, the local economy is under control and interest rates are at a reasonable level.
He’s also bullish on gold, saying that he’s hoping to buy back into the gold market at the beginning of 2012. (Nenner went long on gold when it was trading at $US400 per troy ounce, but later closed out his position). He believes that the bull market in the precious metal will continue, with the gold price hitting $US2500/oz in a year or so particularly if, as he predicts, a major global conflict erupts in late 2012 or 2013.
Nenner also forecasts that in the middle of next year, the US dollar will enter a major bull market that will last several years.
Given the perilous outlook for the global economy, what are Nenner’s favourite investments for 2012? ”Buy land,” he said. “I want something tangible — not anything connected with the financial system, not banks. And real estate is still over-priced.”
On the other hand, he says, land is an attractive option given that agricultural commodities such as wheat, corn and beans will be in a bull market for the next 10 years.
“I’m from the Netherlands,” he said. There the investment approach is to avoid losing money. And there will be a lot of wealth destruction next year.” He adds that most of his clients are also focused on avoiding losses.
“Their mood is very negative. Everybody is looking at which bank they should be keeping their money in. Everybody is very worried. Most of them are buying farm land — in Australia, in Canada and in the mid-west of the United States.”