EXCLUSIVE: The Cow Guy Warns Of Market 'Reckoning' In 2024 — 'We're Getting Closer And Closer'

Equity markets made strong gains in the last two months of 2023, powered by expectations of several rate cuts from the Federal Reserve and under the assumption the U.S. economy would remain resilient. Neither of these two scenarios are true and there’s going to be a “reckoning” in 2024 a market specialist told the hosts of Benzinga’s PreMarket Prep on Monday.

Scott Shellady, also known as The Cow Guy, believes that the weak link in the economy is the consumer, and that the labor market is weaker than jobs data have suggested.

“If you’re between the age of 18 and 35 and you want to move to a good job, they’re just not out there. There’s a lot of service sector jobs, but the overall strength of the labor market doesn’t add up to me,” he said.

“The economy is not fine — 38% of reported companies this year have said they’re going to be laying people off,” he added.

After a dip during the first few days of 2024, the buying has come back, and in the last three days the equity markets are making all-time highs. The S&P 500 reached a new peak on Monday at 4,846.82. The SPDR S&P 500 ETF Trust SPY, the exchange traded fund that tracks the index, also hit a new record at 483.01.

Also Read: VIX At 2-Month High: Fears Mount As Markets Re-Assess Rate Cut Premium

Recession Right Now For Many Americans

Shellady believes that a reckoning for the markets is coming. He says that the lower 60% of the population of the U.S. is likely in a recession right now.

“People say look at the strength of the consumer,” he said, but explains how indebted consumers are becoming, and that they won’t be able to keep supporting economic growth for much longer.

“Consumers have moved from their pandemic savings, to their actual savings, then they went to credit cards, then to home equity lines of credit, then to their 401(k)s, and now they’re doing buy-now-pay-later.”

“There is going to be a reckoning — this can’t go on. At some point in time you’re going to run out of money and we’re getting closer and closer,” he said.

Rate Cut Hopes Overpriced

Neither the consumer, nor equity markets are likely to be saved by a series of rate cuts this year. Shellady thinks the market is not trading in a healthy manner, as traders are too obsessed by expectations of several cuts.

“I’m definitely not thinking six rate cuts — I’m thinking just one,” he said.

“And the market’s so desperate for them, any time there’s a whiff of any news on rate cuts the market screams higher. So it’s not trading healthily — they’re begging for rate cuts.”

Shellady thinks there are still enough hawks at the Fed to recommend caution, with inflation still above its 2% target. The Fed will wait to make sure its mandate to bring inflation back to target is thoroughly on track, he believes.

“If you’re going to wait and see, you’re not going to start cutting until you start seeing signs of weakness in the economy,” he said.

“So be careful what you wish for, because you might get your rate cut, but only on the back of the fact of a 15% (economic) downdraft.”

Now Read: Baby Bust: Will Falling Birth Rates Drive Growth, Markets Lower?

Image: ScottShellady/RFD-TV StuBaileyPhoto/Pixabay