American economist Harry Dent said that the US stock market may have a significant fallback, leading to a more serious crash than investors saw during the Great Financial Crisis in 2008 and 2009. Dent, an alumnus of Harvard Business School, has long predicted a major crash in the stock market and the subsequent economic downturn, and now he has issued another warning about market conditions. Dent said that because the loose monetary and fiscal policies of the past decade have pushed up asset prices, the stock market looks like a "bubble within a bubble." Dent estimates that when the bubbles finally burst, the S&P 500 index could fall by as much as 86% and the Nasdaq Composite Index by as much as 92%. He says stocks like chipmaker Nvidia, a "hero," could fall by as much as 98%, meaning a market crash worth trillions of dollars. "This bubble is going to burst. We're showing signs of a top right now," Dent said in an interview on Sunday, pointing out that the stock market is currently "almost" not hitting new highs. "We have to see about a 40% decline before we can say, OK, the bubble is finally dissipated. Once you get that kind of momentum, I think it's hard to stop." Dent estimates that the bubble has been forming for 14 years, much longer than most bubbles in history, which usually last for 5 to 6 years before bursting. Part of the reason, Dent said, is that the market has been flooded with stimulus measures since the 2008 recession. He estimates that the market has benefited from about $27 trillion in stimulus plans since the financial crisis, factoring in accumulated budget deficits and the amount of cash printed since the crisis. Meanwhile, interest rates have also remained at extremely low levels for much of the past decade, which has helped push up asset prices. "It's taken longer to be pulled up higher, so you have to expect a bigger crash than 2008 and 2009," he said. "This really is a second version of the tech bubble," he added, referring to the dot-com bubble of the early 2000s.
This Harvard Business School alumnus has long predicted a major market crash and subsequent economic downturn, and now he's issued another warning about market conditions.
Dent said that the stock market looks like a "bubble within a bubble" due to loose monetary and fiscal policies of the past decade that have pushed up asset prices.
"This bubble is going to burst. We're showing signs of a top right now," Dent said in an interview on Sunday, pointing out that the stock market is currently "almost" not hitting new highs.
"We have to see about a 40% decline before we can say, OK, the bubble is finally dissipated. Once you get that kind of momentum, I think it's hard to stop."
Dent estimates that the bubble has been forming for 14 years, much longer than most bubbles in history, which usually last for 5 to 6 years before bursting.
Part of the reason for the bubble is that the market has been flooded with stimulus measures since the 2008 recession. He estimates that the market has benefited from about $27 trillion in stimulus plans since the financial crisis, factoring in accumulated budget deficits and the amount of cash printed since the crisis.
Meanwhile, interest rates have also remained at extremely low levels for much of the past decade, which has helped push up asset prices.
"It's taken longer to be pulled up higher, so you have to expect a bigger crash than 2008 and 2009," he said. "This really is a second version of the tech bubble," he added, referring to the dot-com bubble of the early 2000s.
Dent predicts that investors may see the consequences of the US Federal Reserve's quick tightening of monetary policy to control inflation in the early to mid-2022.
High interest rates are not good for the stock market and may cause economic downturns due to the tightening financial environment.
"After the bubble, there won't be a recession. It will be followed by a depression," Dent said. "I can tell you, there hasn't been a bubble in history––and this one is much bigger and lasts much longer––that hasn't ended in a bad outcome."
Edited by Jeffrey