Stocks Rally Will End Within Six Months, Tice Says

By Sapna Maheshwari and Deirdre Bolton

Sept. 22 (Bloomberg) -- The biggest U.S. stocks rally since the Great Depression will end within six months because the economy isn’t improving fast enough, said David Tice, Federated Investors Inc.’s chief portfolio strategist for bear markets.

Tice said the Standard & Poor’s 500 Index will fall below 400 points within 18 months, a level it hasn’t closed below since 1992. Tice said he has been “bloodied, but unbowed,” as the S&P 500 climbed as much as 58 percent from a 12-year low in March, an advance that he called a “sucker’s rally” in April.

“The economy is in really, really bad shape,” Tice said in an interview with Bloomberg Television. “So many people are trying to be optimistic. We’ve gone from oversold to overbought.”

The Federated Prudent Bear Fund that Tice founded returned 27 percent last year as the S&P 500 plunged 38 percent, the most since 1937.

The S&P 500’s six-month rally pushed its valuation to almost 20 times the reported earnings from continuing operations of its companies, the highest level since 2004, according to weekly data compiled by Bloomberg. The index traded at its lowest price relative to profits in 24 years in March.

Government stimulus money is making the economy look healthier than it is, Tice said. He said the “entire financial system is operating in the good graces of government intervention.”

To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net