Australian markets continue their descent in today's session, with all but the materials sector in the red this afternoon.
The benchmark S&P/ASX 200 Index (ASX: XJO) is down 72 basis points on the day at 6,507, whereas the high-flying S&P/ASX 200 Energy Index (ASX: XEJ) is flat.
Meanwhile, Australian inflation data this week showed the consumer price index increased 6.8% from July–August, as Brent Crude oil declines 8% over the month to date.
Where are we now?
Let's step back a bit. As seen in the chart below, all of the ASX sectors, except utilities, have shown an overall uptrend since March 2020 – the onset of COVID-19.
It's a busy chart, granted, but the benchmark index is seen with the black line. As of today's trade, we are now trading below pre-pandemic highs.
Essentially all of the stock market gains brought on by the speculative mania over the past two-and-half years have been erased.
Fast forward to today and things are very different.
The market peaked in August 2021, and has been on a descent into chaos ever since. As seen in the chart below, the ASX 200 index has a mountain to climb to its former highs.
This year to date, energy remains the only sector in the green, with technology – the former darling child of the ASX – booking substantial losses from its former highs.
"We are in deep trouble"
It's not often you hear a legendary investor speak with such a negative tone about the markets. However, that's the posture Stanley Druckenmiller held recently at the CNBC Delivering Alpha Summit this week.
The fund manager, who has an impeccable track record, said his firm sees a sharp downturn, leading to a hard economic landing in 2023.
"Our central case is a hard landing by the end of [FY23]…I will be stunned if we don't have a recession by FY23," he said, cited by CNBC.
Speculative mania has driven much of the wild upswings in global share markets over the past two years, creating a bubble in financial assets, Druckenmiller says.
But times are changing.
"All those factors that cause a bull market, they're not only stopping, they're reversing – every one of them," he added.
"We are in deep trouble."
David Rubenstein, co-founder of Carlyle Group, was a little more upbeat at the summit. He said that investors "shouldn't be afraid" of buying into the stock market weakness.
However, Rubenstein also warned that investors should avoid trying to find a market bottom.
"It's a fool's errand to find the bottom in the market or the top in the market…trying to wait to the absolute bottom is probably a mistake, in my view."
In reality, there's too many moving parts to even try and predict a market bottom right now. In the meantime, the downward spiral continues for the benchmark index, as seen below.
