Both the S&P 500 and gold are hitting new highs.

The stock market could drop by 80% as the economy struggles to emerge from the pandemic. Gold could hit $2,300 this year.

We shouldn’t expect a vaccine to be the cure to all the economy’s problems.

The U.S. stock market keeps rising despite rising virus cases and a sloppy recovery. The S&P 500 has rallied by more than 45% since hitting bottom on March 23.

There’s strong reason to believe that the rally is not sustainable and that equities could collapse soon.

We’re In the Midst of a Massive Bust

David Hunter, the chief macro strategist at Contrarian Macro Advisors, believes that the economy is in the midst of a massive “bust” consisting of two phases.

We are now in the first phase, which consists of the initial bear market and short-lived recovery.

The second phase of the bust, which Hunter expects to take place in late 2020 or early 2021, will see a much steeper downturn than the first phase.

Stimulus measures have failed to support many sectors of the economy that need help.

Many businesses have gone bankrupt because of the lockdowns. Hunter predicts we’ll see much more insolvency in the second phase.

He said on The Contrarian Investor Podcast:

We have debt beyond anything we can ever manage. When you get these surprises, that leverage really exacerbates whatever downturn you get.

Hunter expects the stock market will have a melt-up and hit new record highs before crashing:

So I believe in the next few months, you’ll see … I’ve been calling from 4,200-4,500 on the S&P — I think you’ll see that this year and probably by this fall. And melt up means it’s going to go parabolic. It’s going to get even steeper than it’s been out of the March trough.

When investor exuberance ultimately dries up, Hunter sees the stock market losing up to 80% of its value.

He’s much more optimistic about the future of gold, which recently hit a record high of $2,000 an ounce. He sees the yellow metal going to $2,300 this year.

Watch: David Hunter Predicts the Stock Market Will Crash By 80%

Due to unprecedented stimulus and inflationary pressures, he believes gold can reach $10,000 or more by the end of the decade.

A Vaccine Won’t Prevent Stocks From Crashing

Encouraging results from vaccine trials have driven stocks higher. Dr. Anthony Fauci said Friday he is confident a vaccine would be ready early next year.

There seems to be a belief that once a vaccine is available, everything will go back to normal.

Solomon Tadesse, the North America head of quantitative equities strategies at Societe Generale, thinks investors may overestimate how quickly a successful vaccine can restore lost economic activity and corporate revenues.

Tadesse said in a recent note:

With questions on the effectiveness and wide availability of vaccines remaining, as well as the potential impacts of the pandemic’s damage to the economy, there may be more downside risk from markets overshooting.

When it comes to the vaccine, Tadesse has four specific concerns that crush hopes of a swift recovery.

First, he points out that despite the nearly 200 vaccines in development, there is no guarantee that any of them will be effective on a large scale.

Second, there is no guarantee that the vaccine will be widely available. Tadesse cited a survey by Lazard, which showed that 73% of healthcare executives don’t expect an effective vaccine until the second half of 2021.

Third, there will be people who refuse to be vaccinated, which can slow the process of ensuring herd immunity.

Fourth, it will take some time for people to unlearn their new pandemic habits and revert to their normal behavior even after a vaccine is available. A return to pre-pandemic practices would help boost business income and overall economic activity.

The stock market may be looking at an economic recovery that will end up being less impressive than expected. The long-term negative economic consequences of pandemics could last several decades.

Watch: When a Vaccine Could Be Ready

When investors realize the economic damage will last several years, a market meltdown is likely.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author holds no investment position in the above-mentioned securities.