Sprott Says S&P 500 to Tumble Below its March Low

Dec. 29 (Bloomberg) — The Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize, according to hedge fund manager Eric Sprott.

The Toronto-based money manager, whose Sprott Hedge Fund returned 496 percent over the past nine years while the S&P 500 lost 32 percent, said the index’s 67 percent rally since March reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9.

“We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,” Sprott, chief executive officer of Sprott Asset Management LP, which oversees C$4.3 billion ($4.09 billion), said in an interview Dec. 18.

Investors in Sprott’s funds have been rewarded by his holdings in gold, which has climbed 40 percent since October 2007 as the S&P 500 lost 26 percent. The metal has retreated 9.3 percent since closing at a record $1,218.30 on Dec. 3.

The S&P 500 added 0.1 percent to 1,128.52 as of 10:09 a.m. today in New York, rising for a seventh day.

Sprott said the Federal Reserve has kept bond yields and interest rates artificially low through its program to buy agency debt and mortgage-backed securities. The central bank expects the securities purchase program to finish by the end of March.

Expiration of the program would reduce demand for fixed- income securities, forcing up bond yields and interest rates and hurting economic growth, Sprott said.

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http://www.bloomberg.com/apps/news?pid=20601087&sid=aNKd7Uck3FoM

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