David Stockman is not backing away from his ultimate bearish position, warning viewers of CNBC that “there are some huge surprises lurking out there” because “we’ve had eight years of monetary expansion that is just off the charts of history.”

He is certainly not wrong there…

President Reagan’s Office of Management and Budget director fears an aging stock market rally combined with potential headwinds from President Trump’s fiscal policy decisions (as well as questionable earnings expectations) means “it’s all risk and very little reward in the path ahead.”

“I call this a daredevil market…This market is just way, way over-priced for reality.”

As Nasdaq and Small Caps surge to new record highs, Stockman warns “the S&P 500 could easily drop to 1,600 because earnings could drop to $75 a share the next time we have a recession.”

“We’re about eight or nine years into this expansion. Everything is crazily priced. I mean the S&P 500 at 24 times at the end, tippy top of a business cycle.”

The current growth cycle has been the second longest on record:

But it has been much shallower than the previous cycles:

As a former budget director, it is likely no surprise that one of his biggest gripes with the bulls is the notion that President Donald Trump’s tax cuts are providing a fundamental lift to stocks.

“These tax cuts are going to add to the deficit in the 10th year of an expansion. It’s just irresponsible crazy,” he said.

“It’s all going to stock buybacks and M&A deals anyway. That doesn’t cause the economy to grow. It’s just a short-term boost to the stock market that doesn’t last.”

Judging by the highest taxed companies performance relative to the market, Stockman may well have another point…

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