There may be no escaping the recession.
According to investor Peter Boockvar, the latest reports on housing and manufacturing suggest it is spreading quickly to other parts of the economy.
“People are not sensitive enough to this economic slowdown and what it will mean for corporate earnings and profit margins,” Bleakley Advisory Group’s chief investment officer told CNBC’s Fast Money on Monday.
The National Association of Home Builders/Wells Fargo housing market index turned negative in August. This is the eighth consecutive month that builder confidence has fallen. In a press release, NAHB Chief Economist Robert Dietz said, “Tighter Federal Reserve monetary policy and persistently elevated construction costs have led to a real estate recession.”
Almost exactly a year ago, Boockvar predicted a home burglary on CNBC’s Trading Nation. He warned that the Federal Reserve is fueling another housing bubble that will wipe out home equity.
As a longtime Fed critic, he expects the central bank to make a serious mistake by raising interest rates and tightening monetary policy to fight inflation.
“If you look at previous rate-hike cycles, it was always lower levels of a fed fund rate that started to wreck things,” Boockvar said. “But each successive rate hike cycle ended before the previous one because something broke. So now we are starting to move into dangerous territory where there is a risk of things breaking.”
On Monday there was a second discouraging economic report. The New York Fed’s Empire State Manufacturing Survey for August plunged 42 points. It was coupled with a slump in new orders and shipments. Boockvar called it an “ugly report” in a note.
Still, the major indices started the week in the green. The Dow recorded its fourth positive day in a row. The S&P 500 and the tech-heavy Nasdaq closed higher for the third time in four sessions.
But Boockvar suggests the rally is on thin ice because it’s early in a downturn. He lists three phases of a bear market and suggests that investors deny it.
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“I can argue that we’re really just getting started… part number two, where growth is slowing down and we’re starting to see the impact on earnings, particularly profit margins,” he said. “This has a way to go to work through door number two.”
But Boockvar believes investors can still make money. In this environment, he recommends value names over momentum tech.
“Value will still significantly outpace growth,” said Boockvar, a CNBC contributor. “Growth valuations, even with these declines, are still quite expensive where there are many forgotten value names already embedded with low expectations.”
He also likes commodity stocks, including precious metals, natural gas and oil.
“I’m still fairly bullish on commodities in general and acknowledge the pullback as I’m concerned about the demand side,” Boockvar said. “But [I’m] still very bullish on supply-side challenges.”
On Monday, WTI crude fell nearly 3% to close at $89.41 a barrel — having hit its lowest level since February 3 earlier in the day.