Economic guru Dennis Gartman warns that the recent stock market bull rally may be coming to an abrupt end, with U.S. shares poised for another five percent tumble.
U.S. stocks suffered their biggest loss in five months Tuesday as a health care bill backed by President Donald Trump ran into trouble in Congress, which raised questions about how soon his business-friendly policies of lower taxes and looser regulations will be enacted, the Associated Press reported.
The Standard & Poor's 500 index lost 29.45 points, or 1.1 percent, to 2,344.02. The Dow Jones industrial average skidded 237.85 points, or 1.1 percent, to 20,668.01. The Nasdaq composite sank 107.70 points, or 1.8 percent, to 5,793.83.
"This is the start of at least a 5 percent correction, and perhaps something far worse than that over time," Gartman told CNBC. "I take this very seriously," said the editor and publisher of the Gartman Letter.
"This is not just a one off circumstance in the equities market."
The steepest pullback in stocks since the U.S. presidential election reveals investor angst about Trump's ability to push through major reforms, leaving stocks vulnerable to a long-anticipated correction.
The S&P 500, in its second longest bull market ever, has risen close to 10 percent since the Nov. 8 election on optimism about Trump's pro-growth agenda. With valuations at their highest in over a decade, investors have been expecting a pullback even if its catalysts haven't been clear, Reuters reported.
Trump, looking to score the first major political win of his presidency, on Tuesday warned Republican lawmakers that if a healthcare bill he backs fails to pass, it would cause "political problems."
Stocks fell alongside the U.S. dollar, while Treasuries and gold rallied.
Alongside equities, base metals and crude oil posted lows while gold and bonds broke out to the upside, suggesting a wider shift in capital markets, CNBC.com explained.
"I think there's something to the downside that could be quite serious," Gartman said. "Let us hope it's merely a 5-7 percent correction and nothing more than that."
Gartman added that the outlook for earnings remains strong, however he urged caution.
"At the end of bull markets, earnings always look great. Earnings don't look bad until you've gone somewhere into an economic downturn."
"Earnings lag by at least a quarter, and usually by a half, so you're going to get the best earnings right at the peak of economic activity."
(Newsmax wires services contributed to this report).
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