The S&P 500 falls more than 20% as it finally succumbs to the incipient global recession.

Janet Yellen states in the 1st half of 2016 that the Fed will not be willing to increase the Fed Funds Rate any further and subsequently hints at another round of QE before the end of 2016.

As a consequence of this tacit admission of failure by the Fed to save the economy from the Great Recession, the US Dollar crashes below 90 on the DXY.

Gold and the miners will be the major winners next year as they will be the primary beneficiary of a global slowdown, continued low nominal interest rates, negative real interest rates and a watershed turn in the value of the USD as the yellow metal surges to $1,250. The second place winner will be shorting high-yield debt (which is currently a profitable trade for PPS clients) and buying put options on high-flying NASDAQ momentum stocks that are trading at monstrous PE ratios and whose prices will collapse because of a deceleration in the US economy.

The Ten-year Note yield will fall below 2% by June on pervading recession concerns.

Finally, after the dust settles from this anticipated huge selloff, there will be a tremendous opportunity from owning high-divided paying foreign stocks, which have already been mercilessly beaten down during the commodity bear market debacle of the last few years.

Why will 2016 be different from 2015: Simply because the Fed has finally started to raise interest rates and will continue to slowly do so until the US economic recession fully manifests. Whether or not Ms. Yellen has finished rate hikes or if the Fed can get in one or two more before the bottom falls out is largely irrelevant. The fact remains that Q4 GDP growth is barely above 1%, according to the Atlanta Fed GDP model. Any additional rate hikes will only expedite the inevitable slowdown as the global recession has already hit US shores. The catalyst for this imminent recession is that asset prices and debt levels have increased to a level that can no longer be supported by incomes and economic growth.

I cannot stress how important the watershed change in US monetary policy will be for markets in early 2016. The major markets (meaning currencies, bonds and equities) have been anticipating a graceful exit from QE and the trillions of dollars’ worth of deficit spending that have been deployed since 2011. In other words, the entire world of capital markets have been banking on the success of central banks. In the vanguard of this belief has been the universal carry trade of going long the dollar and equities, while shorting precious metals.

I believe in realities not fantasies. I’m betting that you cannot solve the debt crisis evident during the Great Recession by taking on a record amount of debt, and that you cannot fix the asset bubbles evident during the Great Recession by artificially pushing them to record high prices through QE and ZIRP. It is this reality that will take its vengeance in 2016. And it is the unraveling of this delusion that is the basis of Pento Portfolio Strategies’ investment model that is the opportunity we are prepared to profit from.