Need to Know: These two commentators who have been warning of a market crash say it’s now here

Our call of the day comes from a pair of money managers who have been banging the table about a crash brewing for this market, and are warning even louder now. They are warning investors to get prepared.

The pair are Michael Gayed, a portfolio manager at Tidal Financial who offers trading strategies via the Lead Lag Report, and Michael Kramer, founder of Mott Capital Management. They posted a discussion on Wednesday that spoke of an “imminent market crash.”

“What we’re seeing in Treasurys should make a lot of people nervous. I’ve never seen anything like it, and I’ve been following this market since the mid-90s,” said Kramer, who recently discussed how the new bull market was already over.

In their chat, Kramer told Gayed that it makes sense to see Treasury yields this high, given the Fed jacked up interest rates 500 basis points and the market tried to get ahead of the Fed each time it expected a rate hike. When the Fed started to “mess around with slowing rate hikes,” hinting of a pause and the market tried to second guess that as well.

He said the surge in Treasury yields may be “near the end,” but there may be a bit to go. Kramer also told subscribers on Wednesday that the S&P 500 decline “doesn’t look complete yet,” and 4,115 can’t be ruled out.

One chart Kramer has been focused on for awhile is shown here, and in followup comments he tells MarketWatch that he suspects, as he has for awhile, that the S&P 500 has been in the grips of a long bear market rally, rather than the start of a new bull market:

Where does he think investors should be investing right now? For those excited about bitcoin recently, Kramer sees cryptos as way too volatile, so he’s sticking to “money market accounts, taking my 5%-ish and leaving it at that. To me that’s the best hedge against volatility. And for me, that’s the best hedge that provides me the liquidity to be able to move in and out of the market if I so choose.”

Gayed posted a few days ago on Seeking Alpha that the fact many stocks are underperforming is “consistent with a market crash.” He argued in January that a melt-up later in the year was coming, but also predicted a “credit event” due to lagged effects of the fastest rate hike cycle in history.

What Gayed does see, is that the Treasury selloff risks turning into a corporate credit event. “Credit spreads ARE starting to widen, consistent with what you see in a traditional credit event and stock market crash,” he said, offering up this chart:

So after the crash in Treasurys, Gayed is on guard for Part 2, when “credit spreads blow out and stocks collapse.” Note, that widening credit spreads indicate looming defaults.

“If I’m right, the mother of all short squeezes is still set to come in Treasuries, and people suddenly realize too late they were tricked into a narrative around AI and a ‘bull market’ that in reality made them exit liquidity,” he wrote on Seeking Alpha.

You can listen to the two discuss the market troubles on YouTube.

And here’s the last word via X from Gayed:

The market

Stock futures
ES00,
-0.30%

NQ00,
-0.49%
are lower, with tech leading the downside again, as the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
is stady at 4.95% and the dollar
DXY
is higher. Oil prices
CL.1,
-2.15%
are down over 3%.

The buzz

Third-quarter GDP rose 4.9%, which was slightly stronger than forecasters exepcted, with weekly jobless claims rising 10,000 to 210,000, durable goods jumping 4.7%, and the trade deficit widening. At 10 a.m., pending home sales will be released.

The European Central Bank has left interest rates unchanged as expected, commenting that inflation has dropped “markedly” in the region.

Meta Platforms’
META,
-4.17%
posted forecast-beating revenue, but talk of weak ad demand in the current quarter amid the Israel-Gaza war spooked investors. Shares are down nearly 3%. From London, Global ad company WPP
WPP,
-2.23%
confirmed the gloom in that space.

Opinion: Meta’s risky business of big AI spending amid rocky ad market

Amazon.com
AMZN,
-5.58%
is the next big tech in the spotlight, with results due after the close, alongside a bunch more including Intel
INTC,
-5.09%
and Chipotle
CMG,
-0.71%.
Ahead of those, UPS
UPS,
-1.60%
stock is headed for a three-year low after a revenue miss and outlook cut. Southwest
LUV,
-1.26%
is nearing a 9-year low after revenue and load factor misses. Royal Caribbean
RCL,
-0.32%
is surging on an earnings beat and higher outlook, because of demand for experiences.

Ford
F,
+1.32%
also reports after the close, and United Auto Workers announced a tentative deal to possibly end weeks of strikes.

More late reporters: Mattel
MAT,
-0.49%
is down 7% after disappointing guidance, Whirlpool Corp.
WHR,
-1.13%
is tumbling after a guidance cut and Align Technology
ALGN,
-4.43%
is off 20% after disappointing results from the orthodontics maker.

Elsewhere, Endeavor shares
EDR,
-1.99%
are up 20% private-equity giant Silver Lake said it may take the sports and entertainment company private.

A gunman killed in Maine entered a bowling alley and bar, killing at least 16 people with a manhunt underway.

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The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

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