(Bloomberg) -- Guggenheim Partners’ Scott Minerd thinks the Fed will continue with rate increases until “something breaks,” adding that he is beginning to see “cracks” forming.

Elaborating on CNBC after his tweet, Guggenheim’s Global Chief Investment Officer said the Federal Reserve could be forced to stop and pivot as soon as early November. The risk of a “financial accident” that forces the Fed’s hand is growing and investors should be prepared. 

Financial accidents “tend to occur” during times of Fed tightening and come from tight corners of the markets, he said, noting that M2 money supply is “actually contracting” for the first time since the Great Depression.

The pace at which the “Fed and other central banks were removing accommodation is beginning to spill over into the financial markets,” he added. 

The VIX Index has been elevated, Minerd said, but volatility has yet to reach a level consistent with capitulation. 

This means the bear market is well entrenched and still has further to go. As such, it makes sense for investors to stop trying to pick a bottom. They should, instead, get positioned for the eventual capitulation, he said.

Scott Minerd Says Stocks May Drop ‘Another 20%’ by Mid-October

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(Updates throughout with comments from CNBC interview)

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