- The US is poised to see an epic stock market crash next year, according to Harry Dent.
- The ultra-bearish economist pointed to signs that the bubble in asset prices is reaching the top.
- The bust could send the US into a depression, he warned.
The stock market could be in for a steep correction, resulting in a crash even worse than what investors saw during the Great Financial Crisis, according to economist Harry Dent.
The Harvard Business School alum — who’s been predicting a major crash and an ensuing economic depression for years — cast another warning on the state of the market.
Dent says stocks look like they’re in the “bubble of all bubbles” thanks to overly loose monetary and fiscal policy that has inflated asset prices for the past decade.
When that bubble finally bursts, Dent estimates that the S&P 500 could lose as much as 86% in value, while the Nasdaq Composite could lose as much as 92%. “Hero” stocks, like chipmaker Nvidia, could drop as much as 98%, he said, implying a multi-trillion market crash.
“This thing has gotta blow. It’s showing signs of topping here,” Dent said in an interview with Fox Business Network on Sunday, noting that stocks were now “barely” making news highs.
“We’ve got to see a crash of about 40% to say, okay, the bubble’s finally let off the steam. And once it gets that much momentum, I think it’s hard to stop,” he warned.
Dent estimated that the bubble has been forming for the past 14 years, far longer than most bubbles in history, which typically last for five or six years before bursting, he said.
That’s partly because markets have been flooded with stimulus since the 2008 downturn, Dent said. Markets have benefited from around $27 trillion in stimulus since the financial crisis, he estimated, based on accumulated budget deficits and the amount of cash printed since then.
Interest rates, meanwhile, have also remained ultra-low for most of the past decade, which has helped inflate asset prices.
“It’s been stretched higher for longer, so you have to expect a bigger crash than we got in 2008 and 2009,” he said. “This is really the second tech bubble version,” he added, referring to the dot-com bubble in the 2000s.”
Dent predicted that investors could see the fallout early to mid-next year, thanks to the Fed’s rapid monetary policy tightening meant to control inflation.
High interest rates are bearish for stocks and could send the economy into a downturn by tightening financial conditions.
“Bubbles are not followed by recessions. They’re followed by depressions,” Dent said. “I can tell you there has not been one bubble — and this is far larger and longer — on major bubble in history that has not ended badly, period.”
To be sure, Dent’s view is an outlier on Wall Street, with more investors warming up to the prospect of a soft landing. The economy remains on solid footing, as GDP continues to show slower but still positive economic growth. The US is also adding jobs at a steady pace, with the latest employment report handily beating expectations.
