Investor who nailed the 1987 crash ditches stocks and bonds and here’s why

Investor who nailed the 1987 crash ditches stocks and bonds and here’s why

Critical information for the U.S. trading day

By this time next week we’ll be knee-deep in earnings from J.P. Morgan, Wells Fargo, Netflix, and a pile of other big names.

Until then, at least for Friday, it could be possible to have fresh records for the big U.S. indexes as we continue to bask in the warm afterglow of a dovish Fed.

Enter party-pooper Bank of America Merrill Lynch who warned clients Friday of an “overshoot” in credit and equity prices in coming months, followed by a “big [second half] top in asset prices.” Caution of that kind seems to be only getting louder as we bump along to these new highs.

Our call of the day comes from the chief executive of Milton Berg Advisors, Milton Berg, who heeded his own warning signs earlier this month. He turned bearish on the S&P 500 and Nasdaq on July 2 as his two portfolios have seen gains of 20% plus this year.

Berg told digital financial media group Real Vision in an interview that there’s one big reason he’s out of the market for now: “We have a list of more than 100 indicators that we match to previous market peaks and of all these 100 only two are inconsistent with levels seen at market peaks.”

Berg uses a trove of proprietary indicators and historical data to make his calls. His claim to fame, outside of working with hedge fund biggies like George Soros and Stanley Druckenmiller, is nailing the 1987 market crash to the day.

Still, Berg says there’s is one thing that doesn’t quite add up for that view that stocks are nearing a peak. Thirty-year TMUBMUSD30Y, +0.00%  U.S. bonds on a 6- and 12-month basis are doing far better than they’ve ever done at a final market top, he notes.

Berg has also turned bearish on the bond market, where investors have been piling in on fears of a recession. State Street Global Advisors recently reported that bond exchange-traded funds drew a record $25 billion in June, beating by a huge margin a prior record in October 2014.

He says the bond conundrum may also send another message to investors. That the final leg of this stock market rally coincides with a bond market rally, which will signal a peak for stocks.

The market

The Dow DJIA, +0.90%  , S&P SPX, +0.46%   and Nasdaq COMP, +0.59%    futures are in the green, after Thursday’s record-setting session.

Oil US:CLN19 US:CLN19 is up, and set for a fat 5% gain for the week. The dollar DXY, -0.34% is off, and gold GCQ19, +0.39% is flat.

Europe stocks SXXP, +0.04% are mostly up, while Asia ADOW, +0.32% finished mostly higher.

The buzz

Volkswagen AG VOW3, +1.03%  will invest around $2.6 billion in Ford’s F, +2.94%  self-driving partner Argo AI, in a deal valuing that startup at $7 billion, say sources, with news expected Friday.

CannTrust shares CTST, -5.23% are sliding after the cannabis provider announced a temporary halt to sales.

Tropical storm Barry, which has halved Gulf of Mexico oil output, is bearing down on Louisiana and could morph into a hurricane by early Saturday.

Producer prices showed continued muted inflation pressures. We’ll also hear from Chicago Fed President Charles Evans.

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