Hedge Fund Manager Says S&P 500 Will Fall Below '09 Lows Next Year

Today a Bloomberg article is highlighting some very bearish comments made by Eric Sprott, a top money manager over at Sprott Hedge Fund.

Sprott, who has returned nearly 500% to faithful investors over the last 9 years, is arguing that the S&P 500 index will plummet next year, in fact breaking below the 12-year lows set in March of 2009. Sprott believes that investor confidence in the markets will begin to decline as a now-priced-in rebound in economic growth fails to materialize. The hedge fund manager feels that the S&P 500's 67% rally since March was simply reflective of investors misinterpreting economic data.

"We’re in a bear market that will last 15 or 20 years, and we've had nine of them." Sprott points out that the Fed's recent policy has held bond yields and interest rates at artificially low levels, but, as the program expires (expected by the end of March '10), demand will be reduced for fixed-income securities and yields will consequently rise, effectively hindering economic growth.

Going a bit further, Sprott notes that (to counteract the drying-up demand) if the Fed renewed its programs while the US government is still running a deficit, investors would lose faith in the US dollar. "If they announce another quantitative easing, trust me, the gold price will go up another 50 bucks that day."

Finally addressing what optimistic investors have recently considered a bullish indicator -- modestly improving employment reports -- Sprott says that traders are getting too anxious to find signs of a recovery. "We don't have employment gains. We have less of a decline. That’s a sign of weakness. The data is weak."

So does this mean we should pack our bags and get out ?!?

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