Minerd has been predicting a recession in 2020 and a “nasty” bear market. He sees a sell-off of 40 to 50 percent from the highs.
“Expansions don’t die of old age. They die because the central bank takes them outside behind the woodshed and kills them,” he said on Wednesday.
However, he said, because of falling unemployment and mounting price pressures, the Federal Reserve has no choice but to continue raising interest rates. The Fed is expected to hike rates one more time in 2018 and three times in 2019.
However, by 2020 the fiscal lift coming from the nation’s capital will turn negative, Minerd said.
“You are going to have the confluence of higher interest rates and a drag coming out of Washington fiscal policy, and that’s the formula for a recession,” he explained.
That said, the market has only recently been going through a standard seasonal correction and should move about 15 percent higher from here until next May or June.
He said long-term investors should start reducing their exposure to equities now, while traders can buy stocks and exit before seasonal pressures take over in the second half of the year.