Beaten-down stocks may tumble further as a global recession and earnings slump take hold, top investor Peter Boockvar says

Peter Boockvar
Peter Boockvar.CNBC
  • Investors are excited about inflation slowing and the Fed ending its interest-rate hikes.

  • Yet stocks could suffer from a global recession and earnings weakness, Peter Boockvar said.

  • The Bleakley Advisory chief has warned home prices could drop 20% in some US housing markets.

Investors are celebrating signs of slowing inflation, and the prospect of the Federal Reserve pivoting from hiking interest rates to cutting them. They're overlooking the potential blow to stocks from a global economic downturn and a slump in company earnings, Peter Boockvar says.

"The market's riding on this hope and belief that inflation is rolling over," Bleakley Advisory's chief investor told CNBC on Friday. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average each gained nearly 2% last week, reversing a small portion of their sharp declines this year.

Inflation has surged to 40-year highs this year, spurring the Fed to hike rates from nearly zero to around 4% in a bid to curb price increases. Higher rates discourage spending, borrowing, and hiring — and that means they tend to weigh on asset prices, employment, and economic growth.

The prospect of rates peaking and falling sooner than expected is "creating a lot of relief, because we know inflation and interest-rate hikes have been the main pain point for markets this year," Boockvar said.

Yet investors seem to be shrugging off any concerns about the impact of those rate hikes on the US economy, and the damage a potential global recession next year could deal to corporate profits, he continued.

"That's the next hill to climb for the markets," he said. "That's really the next hurdle to climb and the next leg for the bear market."

The Bleakley chief expects a drop in global demand to pummel companies' earnings and pull down their stock prices, offsetting the boost they get from a more positive rate outlook and less volatile inflation.

Boockvar has been sounding the alarm on rate hikes and the US economy for a while. He recently warned house prices could plunge 20% in the nation's hottest real-estate markets, as higher rates have pushed mortgage rates skyward this year, making homes far less affordable.

He also cautioned a housing slowdown might have knock-on effects on consumer spending and economic growth, given the vast size and huge importance of the sector.

Read more: 'No buyers in sight': A senior economist says home prices will fall by 25% as supply and demand dynamics in the housing market have created a perfect environment for declines

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