- Stocks may slump as bonds gain ground and company profits are squeezed, Peter Borish says.
- A policy error like a government shutdown could tank the US economy, the veteran trader says.
- Borish advises retail investors to pocket some of their Big Tech gains and rejig their portfolios.
Stocks are set to drop, and a misstep by the federal government could trigger an economic catastrophe, Peter Borish has warned.
“Do I think that the S&P is likely to move down from here? Yes,” the veteran trader said during an episode of the The Julia La Roche Show released this week.
The benchmark S&P 500 has climbed almost 16% this year, fueled by frenetic buying of artificial-intelligence stocks, and investors betting the inflation threat is over, the US economy will skirt a recession, and the Federal Reserve will reverse its interest-rate hikes soon.
Borish, a founding partner of billionaire Paul Tudor Jones’ Tudor Investment Corporation, noted the appeal of stocks has been sapped by bigger yields on safer assets like Treasury bonds. Moreover, higher wages and energy costs are threatening to erode corporate earnings, he said.
“I think there’s going to be a little bit of a profit squeeze, which will drive prices down,” he added.
Borish also pointed to the US dollar’s recent gains against other currencies, noting a strong greenback hasn’t historically been associated with outsized gains on stocks. He advised casual investors who’ve made a bundle on stocks like Nvidia and Apple this year to cash out some of their profits and rebalance their portfolios, even though “that’s the hardest thing in the world to do.”
Separately, the Computer Trading Corporation president flagged the risk of an economic disaster.
“My concern is not a recession or a shallow recession,” he said. “My concern is that if we make these gigantic policy mistakes … then the economy could fall off a cliff.”
Borish gave the hypothetical example of congressional gridlock resulting in another government shutdown. He warned that could drive up short-term interest rates and choke public spending, causing an economic slowdown.
