Michael Pento: Stocks & Home Prices To Fall 40-50% As Liquidity Dries Up?

**Michael Pento** (0:00)
If you believe in the reversion to the mean, we've got about a 50% haircut in stocks, and about a 40% haircut in home prices coming.

**Adam Taggart** (0:13)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. When today's guest was last on this program back in December, he warned that after blockbuster double-digit returns in both 2023 and 2024, that stocks were likely to have a tougher time this year. Well, so far, with the S&P slightly down year to date for 2025, that prediction is proving prescient. So, where does it see the market headed from here? To find out, we're fortunate today to talk with money manager Michael Pento, president of Pento Portfolio Strategies. He maintains a 20-point model that guides his portfolio allocation. And today, we'll hear what it's advising him to do right now. Michael, my friend, thanks so much for joining us today.

**Michael Pento** (0:55)
Hey, it's always a pleasure to be with you, Adam. And we have a ton of stuff to talk about. So, I'm anxious for a great interview.

**Adam Taggart** (1:01)
What are you talking about? Nothing's happened since the last time you were here. Nothing's happened.
No, we absolutely do. Ton of questions for you, my friend. If we can, just super quickly, high level, what's your current assessment of the global economy and financial markets right now?

**Michael Pento** (1:19)
Well, of course, everybody's talking about the tariffs. Tariffs are attacks. They create a lot of friction. And Adam, I want to preface what I say here. I am a libertarian. I voted for Donald Trump. So I'm not against Donald Trump. What I'm saying is that tariffs are attacks, and they create a lot of friction in the economy short-term, okay? I think it's absolutely necessary in the long run for the United States to protect this manufacturing base to impose these tariffs. It's the best way to balance our trade deficits, where our goods trade deficits are astronomical, setting records. One of the reasons why the GDP now forecast turned negatives, because the net exports was, I mean, through the roof. So, there are a lot of friction from tariffs. We have deportations, and we have the closing of the border, which again, I think, is essential in the long run. We should know who the heck is in our country. But short-term, a decline in the labor force, at least on the rate of change of growth, is a hamper's growth. It's half of GDP growth. So you have productivity growth and you have labor force growth. Well, half of that growth input is gone. So you have tariffs, you've got a shrinking labor force. The bottom four quintiles have been decimated by inflation since 2020
What's keeping the economy afloat is the top quintile. And the reason why they are keeping the economy afloat is because of asset bubbles. The asset bubbles that are extended in stocks and in real estate. And they are now on the precipice of fault rolling over the cliff. They are in very, very thin ice. And we can talk about that later too. The market, the stock market is priced for absolute perfection.
And therefore, the only really surprise could be to the downside. I'll go into some metrics there. It will blow your mind. And then I have later on sometime in this presentation, I have eight liquidity charts. All those charts are part of my IDEC model, Inflation Deflation Economic Cycle Model. Liquidity is attenuating. And it wouldn't surprise me if later on this year, we had a liquidity trap where the money markets froze, and we could finally get to my grand reconciliation of asset prices that, whereas I've been predicting it was going to happen, and it's going to happen, I have not yet. And I want to make sure everybody understands, because you read the comments sometimes in my interviews like, this guy's been predicting that the stock market is going to tank for years. Well, you know, what I said is that the construct of the economy and market is phony. And that we have to reconcile, if you believe in the reversion to the mean, we've got about a 50% haircut in stocks, and about a 40% haircut in home prices coming. But that doesn't mean that I'm short the market. So how's that for an issue?

**Adam Taggart** (4:36)
At least not yet.

**Michael Pento** (4:38)
At least not yet. I have a plan and a process to do exactly that. But you know what, Adam? And I'm going to go through a lot of data with you, hopefully, to get it out in this interview.
That time is coming close.

**Adam Taggart** (4:56)