A US-based economist has warned of an impending stock market crash that will likely be worse than the 2008 financial crisis, according to a report by Fox News.
Harry Dent, who is a best-selling author and economist based out of the US, employs a unique method for studying economies around the world, and uses his analysis to provide insights on what to expect in the future.
“The current bubble, which is totally artificial, has been building up for at least 14 years, driven by unprecedented stimulus pumping into the economy,” Dent said in an interview to Fox.
The economist reasoned that most bubbles go unrecognized for about five to six years before everything comes crashing, however, the current one is being stretched for a bit longer. “So you would have to expect a bigger crash than we got in 2008-09.”
According to Dent, hyperbole money pumping and the loose monetary policy since the 2008 financial crisis led to inflated asset prices, leading to a “bubble of all bubbles”.
To recover from the economic devastation brought upon by Covid pandemic, governments including the US pumped in massive stimulus into the economies by keeping interest rates near all-time low, which made matters even worse.
“The S&P might crash over 80% from the top and the Nasdaq even higher by 90%,” Dent said while predicting the crash might happen sometime in 2025.
The US Federal Reserve, which first spoke about monetary tightening and easing off the stimulus last year, is seen to be dialing down on the initial stance.
Financial markets were pricing in as many as six interest rate cuts for 2024, with the first of them coming as early as March. However, this seems unlikely as the central bank signaled it would not begin easing monetary policy until it has more evidence that inflation is falling sustainably towards its long-term two percent target.
Recently, the World Bank raised its global growth outlook on the back of resilient consumer spending in the US and now projects the world economy to grow by 2.6%, up 0.2 percentage points from its last update in January.
The US markets had a decent run this year with benchmark S&P 500 rising about 12.99% year-to-date and the tech heavy Nasdaq gaining nearly 17%.
