Chris’ note: Today, an insight from friend of Legacy Research Mason Sexton.
Mason was one of a handful of market timers who predicted the devastating Black Monday crash in October 1987. In fact, in an interview on CNN, he predicted the top in stocks that year… to the day.
And now he’s warning that another leg down in the stock market is weeks away. As you’ll see below, he has an impressive track record of timing markets. So, whether you’re a bull or a bear, his forecast is worth paying attention to.
Read on to find out more…
In 2021, something strange happened…
Inflation – the scourge of the 1970s – began to climb.
For investors under a certain age, this was new. They’d never invested in a high-inflation environment before.
“Not to worry,” assured the men in charge. “Things will get better.”
But in the first two quarters of 2022, the U.S. GDP shrank. That’s one of the common definitions of a recession.
And the Fed, the media, and the president told you it wasn’t really a recession. “Besides, things will get better,” they said.
Then the stock market plunged. And 2022 was the worst year ever for Treasury bonds.
And then the banks began to fail…
We’re only five months into the year, and bank failures have surpassed 2008 in terms of total assets.
“Not to worry,” said Fed boss Jerome Powell. “The U.S. banking system is sound and resilient.”
Once again, the message was the same, “Please don’t worry. Things will get better.”
But today, I want you to consider a radical possibility: What if the worst is yet to come?
What if the stock market moves sideways (or down, after you account for inflation) for a decade or more? That’s what I saw during the first decade of my career in the 1970s and 1980s.
And what if the system – propped up by extraordinary amounts of debt, low rates, and magical thinking – has finally found its limit?
What would you do in that situation?
These are the questions I ask you to consider today.
My research shows me that an event is coming that few of us have seen before. And I predict it will arrive in the next eight weeks. Many investors will be lucky to break even. Many will be utterly wiped out.
But a lucky few will see this coming and position themselves for extraordinary returns.
What you do in the weeks ahead could determine the trajectory of your wealth – and your retirement – for years to come.
Let me show you what I mean…
My name is Mason Sexton. After graduating from Harvard Business School in 1972, I began a career on Wall Street.
I spent three years at Morgan Stanley… did a stint with storied investment bank Salomon Brothers… And also worked at brokerage firm Mabon, Nugent & Company.
Then, in 1984, I founded my own research firm Harmonic Research, where we specialized in precise market timing.
And when I say precise, I mean down to the day or even hour.
Timer Digest – a publication that tracked analysts’ market timing – named me “Top 10 Timer” for 1987, 1988, 1989, 1990, 1992, 1993, and 1994, when I made the cover.
It was during my time with Harmonic Research that I experienced the crash of 1987. Most don’t remember. But 1987 was a great year for stocks… until it wasn’t.
In my “Long-Term Forecast 1985-1992,” which I published in early 1985, I predicted that “in 1987 the stock market will enjoy its biggest rally in history.”
The Dow opened the year at 1,908 points. At the peak, two months before the crash that October, it was at 2,722 points. That’s a 43% increase.
It’s hard for folks who didn’t live through that time to grasp the relief investors felt. After more than a decade of negative “real” (or inflation-adjusted) returns, here was a rally that would lift investors out of the doldrums of the “stagflationary” late 1970s and early 1980s. Things were finally better.
But the worst was yet to come.
On August 14, 1987, CNN interviewed me. As I told the network…
What we think will happen is that we’ll get an important top somewhere around August 24 or 25. […]
If I had to guess the final top, it would be the first or second week of October. When I say “the final top,” that would precede a correction of 15% to 20% “minimum” in the [Dow].
As it happens, the Dow topped at 2,722 on August 25. It was high for 1987. And it was a level the index wouldn’t see for another two years.
You may recall what happened next…
“Sell All Stocks”
On Monday, October 19, the Dow plunged by 508 points, or 22.6%.
To this day, it’s the worst one-day drop for the index in percentage terms.
Black Monday had arrived…
Of course, it’s one thing to predict a crash. It’s another to tell investors what to do about it.
As it happens, I did that too.
On October 2, 1987, I advised clients of Harmonic Research “to sell all stocks.” Six days later, on FNN (the precursor to CNBC), I advised investors to, “Buy puts on the S&P index… Short IBM, GM, PA, XON, and CHV.”
(If you’re not up on trader jargon, don’t worry. A “put” is a bet that a stock or stock market index will fall. When you “short” a stock, you also betting on lower prices.)
Later, one of my clients told me that her traders had made a fortune following this forecast. They were able to turn $100,000 into more than $13 million.
Why should you care about this story today?
The Decision Is Yours
There are times when one decision has momentous implications.
In 1987, the decision was to prepare for a crash… or be wiped out. Even legendary trader George Soros wound up on the wrong side of that plunge. He’s reported to have lost $800 million in a matter of days during the crash.
We face a similar situation today. Except the consequences of inaction could be even more severe than they were on Black Monday.
As I said, my research shows that the carnage will begin just eight weeks from now.
Washington officials assure you at every turn not to panic… that things will get better. But we humans have a natural intuition for danger.
Does it feel like things are okay? Does it feel like things are getting better? If you’re honest with yourself, you know the answer.
What precisely is coming? And how should you prepare?
For answers, I invite you to join me on May 23 at 10 a.m. ET.
During a special presentation, I’ll give you the exact date this event will begin to unfold. This “prophecy” could rival my 1987 call that gave my clients the chance to make fortunes.
So, please, mark the date. Go here to automatically RSVP. I look forward to seeing you there.
Editor, New Paradigm Research