The U.S. stock market is headed for a 40 percent plunge within the next two years, according to former President Ronald Reagan’s director of Office and Budget Management.
David Stockman told CNBC that the early rumblings of a downturn are already underway.
"No one has outlawed recessions. We're within a year or two of one," he said Thursday on CNBC's "Futures Now." He added that: "fair value of the S&P going into the next recession is well below 2000, 1500 — way below where we are today."
This is far from the first time he's issued a dire warning. But this time, he suggests the latest leg down is an early tremor of the pain that lies ahead.
"If you're a rational investor, you need only two words in your vocabulary: Trump and sell," said Stockman, in a reference to President Donald Trump. "He's playing with fire at the very top of an aging expansion."
Stockman cited two primary factors informing his prediction: Trump’s attempts to persuade the Federal Reserve to stop hiking interest rates and the president’s trade war with China.
"He's attacking the Fed for going too quick when it's been dithering for eight years. The funds rate at 2.13 percent is still below inflation," he said.
"The trade war is not remotely rational," he said. If the dispute worsens, it "is going to hit the whole goods economy with inflation like you've never seen before because China supplies about 30 percent of the goods in the categories we import."
His latest thoughts came as stocks will try to build on last week's rebound. The S&P 500 gained 2.4 percent the week ending Nov. 2. However, the index is still down 6.9 percent over the past month.
The Republican economist did not mince words: "We're going to be in a recession, and we're going to have another market correction which will be pretty brutal."