Wall Street is about to see a 40% plunge in stock market, says David Stockman. Stockman has served as the director of President Reagan’s Office of Management and Budget. He warned about the deep downturn that would adversely affect the most bullish investors of the Wall Street. The epic downturn is finally here.

This downturn is seen as the rebound of the S&P 500 Index from its worst month since 2011. He added recessions are not outlawed by anyone and one is approaching soon. S&P’s value will fall far below it is at present.

Stockman suggests that this tremor is the indication of the massive shakedown that lies ahead. If you consider yourself a rational investor, then all you need to do is sell. President Trump is taking risky steps at the apex of an aging expansion. The efforts by President Trump to get the Federal Reserve for putting a stop on rising interest rates from the historical lows is seen as misdirected. Stockman says that Fed has been attacked for going quick, but it is being dithering since eight years. Th present fund rates of 2.13 are below inflation.

The ongoing trade war is also a reason for investors to brace themselves for a sell-off that is prolonged. The irrational trade war can worsen the situation as China is supplying around 30% of goods in the import category. It will hit the entire economy and lead to inflation like never before seen in the history.

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Stocks may build on rebound from the last week. The S&P 500 gained around 2.4% in the previous week, but the index has shown no improvement and is down by 6.9% as was during the last month. Stockman said that the market recession will be very brutal this time.

Source: CNBC, Financial Daily Tips