Novogratz: Markets are in for a rough few months

As markets continue to wobble, with risk assets struggling to string gains, Galaxy Digital CEO Michael Novogratz says the bearishness could sustain for a bit longer.

No ‘big knight on a horse’ for the markets

In an interview with Bloomberg on Wednesday, Novogratz said he expects the markets to have it rough for a few more months. He says the current outlook suggests markets are at “breaking levels in almost every asset class.”  

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The Galaxy Digital founder also noted that Wall Street has almost always had “a big knight on a white horse coming to aid the markets” over the past 30 years – whenever there’s been such pain levels as seen in 2022. 

But as it stands, no one is coming with some sort of juice to excite the stock markets. Indeed, there are no central banks coming to the markets’ aid, he told Bloomberg.

“And so lots of analogs that one might look at that normally have worked, have always worked in the context of a Fed easing cycle. Not where the Fed still has to tighten. And so we’re going to be in for a rough few months of markets that are pricing in tremendous amount of bearishness.”

According to Novogratz, some bearish indicators include inflation having not rolled over yet,  strong US employment growth and geopolitical tensions amid a China-US ‘Cold War’ and others that account for a lot of negative information.

As for all these factors, the Galaxy Digital CEO says investors have them price in, but the bearish outlook remains.

“It’s priced in and therefore, you’re going to see wild bear market rallies, but the trends kind of remain in place.”

Novogratz also talked about what investors are likely to do in this environment, noting that stocks are likely to go down another 15%, 20%. Investors that trade leverage might want to note that the “all-clear” is not out yet and going that route might be at a greater risk.

“If you trade leverage, the all clear sign is not there yet. It takes a whole lot of courage and I would encourage people to bet small. If you’re looking at this over a 15 year horizon, I still think stocks haven’t hit their low… are we 15% maybe from where they finally go, 20%? And so, if you’re looking at a 10 year horizon, sure.”