Former Wells Fargo CEO expects the market to lose 20% or more in the next 18 months

on Jul 22, 2021
  • Richard Kovacevich discusses his bold forecast on CNBC's "Squawk on the Street".
  • The S&P 500, DJIA, and Nasdaq are again trading close to all-time highs.
  • The stock indices started in the red this week but have recovered completely ever since.

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The stock indices started in the red this week but have recovered completely ever since. After Cramer’s forecast on Thursday that the dip might, in fact, pose a good buying opportunity, former Wells Fargo chairman and CEO Richard Kovacevich said on CNBC’s “Squawk on the Street” that the market will lose 20% or more in the next 18 months.

Kovacevich’s remarks on CNBC’s “Squawk on the Street”

“I think investors are concerned about the Delta variant, inflation, and the trillion-dollar deficits that we already have had, and trillion dollars more in the pipeline if the current administration gets its budgets passed through Congress. With all those issues, the market is at an all-time high. So, my feeling is that it’s price to perfection. And we won’t have perfection in the next 18 months,” Kovacevich said.

Kovacevich, however, acknowledged that economic growth was exciting at the moment, and businesses have been reporting strong quarters this earnings season, which is why the market is likely to continue its bull run in the next few months. But in the longer run, if the aforementioned issues persist or get worse, he added, the disappointment is going to weigh heavily on the market.

The U.S. indices are trading close to all-time highs

According to the former Wells Fargo CEO, when compared to rates, it might be a bit of a stretch to say that “the stock market is wildly overvalued” at the moment but reiterated that all of it could change drastically over the next eighteen months.

The three most followed U.S. indices, the S&P 500, Dow Jones Industrial Averages, and Nasdaq Composite, are each up more than 15% on a year-to-date basis. All three have recovered almost entirely from the decline that started after all-time highs in mid-July.