Markets have yet to price in a recession, and that could mean stocks take a big leg lower from here, according to Cantor Fitzgerald’s Eric Johnston.
“I think almost no chance has been priced in, and I say that based on the numbers,” the head of equity derivatives and cross asset told CNBC’s “Closing Bell: Overtime” on Monday. “Right now the market is trading at 18 times the earnings estimates that we see in print, which if we were to have a recession, the numbers would be far lower …”
The rate market, he added, appears to be signaling that a recession is coming much sooner than investors anticipate, which could spell bad news for equities going forward.
While it’s difficult to time the exact bottom of a market, Johnston said now is a good time for investors to sell equities, and get into cash and money market funds for liquidity.
“If we were to get a move lower, you want to be able to be nimble, to take advantage of that equity selloff, he said.
Johnston is negative on cyclicals, which he called one of the “last places you want to be” heading into a downturn.
This article was originally published by CNBC.