ETF.com: And would that be a buying opportunity?
Robertson: What history tells us is that, in the first nine months, there is a 2 to 3 percent fall in the S&P 500 each month. After that is when the big loss of confidence comes. That's when there's the panic of, "Wow, we're going into a global financial crisis. How are we going to manage it this time?"
At that point, you just have to play it incredibly safe and be in cash or Treasurys. But once the dust settles, yes, you've got the best buying opportunity for the next decade.
Typically, after about 12 to 15 months of decline is when you find the bottom. It would be surprising if it were much shorter than that. There is a psychological process of things going wrong, people reacting, central banks making decisions, etc. It's an emotional process that you can't short-circuit.
ETF.com: What's your take on the recent plunge in China's stock market? Is that a concern for you?
Robertson: There's always a chance of China blowing up the world economy now because it's big enough to warrant that level of concern.
Our base case is that we see a major downturn in China not this decade, but in the 2020s. The trigger will be inflation because the Chinese have now got so much debt that inflation and the consequent big interest rate hikes to deal with inflation are what will crack the Chinese story. When you don't have inflation, central banks can just ease policy and inject liquidity into the system. In the short term, I think they can manage it.
Additionally, the latest stock market bubble was too brief to actually distort the real economy. It just didn't drive the real economy sufficiently long enough for it to be a trigger for a big economic downturn.
ETF.com: You mentioned the Fed rate hikes and how those could be a big trigger for a recession in the U.S. How high will rates go before we see a negative impact on the economy?
Robertson: I'm not saying the rate hikes will necessarily be the trigger. They could be. Or it could be Greece, or it could be China, or any of those factors I talked about.
What the Fed has told us is that they're going to be gradual and slow. It will be a hike, then a pause, then a hike, then a pause, and they will do it for as long as they feel comfortable while watching inflation and watching growth.
I doubt we're getting back to 3 to 4 percent rates again. I'd be surprised if they get that high in the next 18 months. I think something would have gone wrong before then.