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Once again, market veterans, financial analysts, and economists are sending a warning message for investors: Brace for the biggest stock market crash of all times — a major pullback has already started! One of the most recent alerts comes from Moody’s Analytics chief economist Mark Zandi, who expects a market correction of up to 20% as the Federal Reserve is left with no other choice rather than hiking interest rates amid soaring inflation. This time around, unlike other sharp drops witnessed in the past, Zandi argues that a rapid recovery won’t be in the cards particularly because the market is extremely overvalued. It would take over a year to return to break even, he said. In an interview with CNBC, Zandi said “the headwinds are building for the equity market,” and “the Federal Reserve has got to switch gears here” because the economy is at risk of overheating.
He suggested that a significant market crash may already be underway because investors are starting to get spooked. Sell-off concerns are also making Morgan Stanley analysts warn that major US stock indexes are in a “rolling correction” despite recording a series of new highs. “As investors rotate away from higher-risk names and as market breadth declines, major indexes will remain vulnerable,” analysts led by equity strategist Michael Wilson said in the note. “Under the surface, financial markets have taken on a much more defensive posture,” the note said. This means that they are observing the initial stages of the stock market crash as investors have started to abandon risky assets. Up until this point, Morgan Stanley has shared a less rosy and more realistic view of the markets compared to other banks. The analysts said they fully expect a market transition to happen, and in the process, several overvalued stocks will face a crash until the end of this year.
It takes just “one extra snowflake to start an avalanche — and boom!,” said the veteran investor, economist, and financial analyst Harry Dent in a recent interview with ThinkAdvisor. Dent said that the epic market bubble is likely to “blow at the end of this month, if not September”. He argued that stocks have no more place in investors’ portfolios, and predicted that most equities will tumble 80% by autumn. “It will be the biggest crash of our lifetime,” he stressed.
In March, he affirmed that “the biggest crash ever” would likely occur by the end of this June and many analysts started disregarding his opinion because that didn’t happen. However, Dent has a good point to explain why the crash hasn’t occurred just yet: “It’s the same old story,” he said. “We’ve been rebounding since [the health crisis] crashed us in March of last year. The stimulus was off the reservation! The central banks said, “We’ll triple down.” But I don’t think the rebound going to last, and the markets don’t think it’s going to last. So the question is: When does it blow?”
And to that question, he presented the forecast that “the end of this month is one of the most likely times, if not September”. Dent is amongst the experts who can see that what we are facing is an “everything bubble” that includes stocks, housing, and bonds. One single failure can lead to the simultaneous burst of the three markets, and the analyst is ringing the alarm on the housing market bubble. “Real estate is still bubbling up, but U.S. home sales have gone down 22% or 23% in just a matter of the last five or six months. That’s a sign there’s a limit to the bubble. So that’s the beginning.”
Similarly, the economist who accurately predicted the 2008 financial meltdown is now waving a red flag about another looming disaster. However, this time, things are much worse than they seem. Nouriel Roubini, an economist at NYU Stern School of Business, argues that the next stock market crash will be the catalyst for a crisis of extraordinary proportions that could lead us to a devastating societal collapse.
Roubini added that due to an impending debt crisis, the government will be insolvent, and thus unable to bail out banks, corporations, and households. In other words, no one will come to our rescue. We will be left will a collapsing economy, crashed markets, bankrupt businesses, and feeling the catastrophic impacts of a decaying purchasing power. This means that the coming everything bubble burst might be the beginning of the end. This slow-motion train wreck looks unavoidable. We will soon see the stagflation of the 1970s meet the debt crisis of the post-2008 period and merge into the most devastating economic and financial disaster in history. The question is not if but when.