The S&P 500 could crash by 30%, a recession is likely underway, and interest rates might not fall before summer, market prophet says

• A market prophet says the S&P 500 could crash 30%, and a recession is probably underway.

• Gary Shilling doubts the Fed will cut interest rates before summer, but sees a return to 1% or 2%.

• Shilling prefers Treasuries to gold, predicts earnings will weaken, and expects many more layoffs.

The S&P 500 could plummet 30%, a US recession may already be underway, and the Federal Reserve is unlikely to cut interest rates before the summer, a legendary market prophet has warned.

Gary Shilling, who served as Merrill Lynch’s first chief economist before launching his own consulting firm over 45 years ago, delivered the dour outlook on a Rosenberg Research webcast in late December. He rang the alarm on company earnings, touted government debt over gold, and predicted layoffs would accelerate in the months ahead.

Shilling is known for making several correct calls in decades past, but financial markets and the economy have defied his dour forecasts in recent years. Here are his 10 best quotes from the webcast, lightly edited for length and clarity:

1. “I think we still can have a 25% or 30% decline in the S&P.”

(The delayed impacts of the Federal Reserve’s hikes to interest rates, and pressure on corporate profits this year, threaten to drive the benchmark US stock index as low as 3,300 points or its lowest level since the fall of 2020, Shilling said.)

2. “I like Treasurys. They’re about the best credit in the world. If you worry about the federal government going broke, you better get your gold bars and AK-47 and a cave to go in.”

3. “I just have never had any interest in gold. It has so many forces that push the price around: political risk, inflation, deflation, mining, what the central banks are doing, and so on. A lot of the time, those forces must basically cancel each other out.”

4. “I think we’re probably in a recession now. NBER wait until they get all the data in, the revisions, and everything else. By the time they make the call, it’s about as handy as…