The stock market could face a catastrophic correction, potentially eclipsing the Great Financial Crisis, according to renowned economist Harry Dent.
Harvard alum Harry Dent, long a vocal pessimist about market overvaluation, has issued another stark warning.
He believes the current market is the “bubble of all bubbles,” driven by excessively loose monetary and fiscal policies over the last decade.
Dent predicts a dramatic downturn: the S&P 500 might plummet by up to 86%, and the Nasdaq Composite could nosedive by 92%.
High-flying stocks like Nvidia could see drops as steep as 98%, indicating a multi-trillion-dollar market crash.
“This thing’s gotta blow. It’s showing signs of topping,” Dent remarked during a Fox Business Network interview. He pointed out that stock gains are now “barely” making headlines.
Dent suggested a 40% crash might be necessary to deflate the bubble, warning that such momentum would be hard to stop once it begins.
Dent claims this bubble has been inflating for 14 years, far exceeding the typical five or six-year lifespan of most market bubbles.
This extended inflation, he said, is due to approximately $27 trillion in stimulus since the 2008 financial crisis, including budget deficits and cash infusions.
Persistent ultra-low interest rates have also contributed to soaring asset prices.
“It’s been stretched higher for longer, so you have to expect a bigger crash than in 2008 and 2009,” Dent asserted, likening the situation to a second tech bubble, reminiscent of the early 2000s dot-com bust.
Dent foresees the market’s collapse beginning early to mid-next year, driven by the Federal Reserve’s aggressive tightening to combat inflation. High interest rates, typically bearish for stocks, could spark an economic downturn by tightening financial conditions.
“Bubbles aren’t followed by recessions. They’re followed by depressions,” Dent emphasized. He noted that every major bubble in history has ended badly, and this one, being larger and longer, will likely follow suit.
Contrarily, Dent’s bleak outlook is an outlier on Wall Street. Many investors are now optimistic about a soft landing for the economy.
The U.S. economy remains robust, with GDP growth slowing but still positive, and job creation continuing at a healthy pace, as evidenced by recent employment reports exceeding expectations.
