Macroeconomist Warns of Potential Worst Market Crash Since 1929

Macroeconomist Predicts Worst Market Crash Since 1929, with a Final Surge Expected

Henrik Zeberg, a well-known macroeconomist, has once again voiced his concerns about an impending recession, which he believes could potentially result in the worst market crash since 1929. In an interview with the Soar Financially YouTube channel, Zeberg specifically focused on the S&P 500 index, stating that it could still see further gains before a significant downturn occurs. Earlier this year, Zeberg predicted that the index would reach 6,100, and it is currently up 17.8% YTD at 5,590.

Despite the current market surge, Zeberg cautions that the peak has not been reached yet. He anticipates a significant “blowoff top” before the recession takes hold. According to Zeberg, the business cycle has begun turning, with leading indicators pointing to an imminent recession. He remains confident that a recession will materialize by the end of the year, likely around September or October, aligning with the market’s peak.

While Zeberg acknowledges the current strength of the economy and labor market, surpassing some expectations, he maintains that a downturn is inevitable. He suggests that the current approach of being long on the market is likely to change in the near future.

These warnings from Zeberg follow similar concerns raised by Paul Dietrich, chief investment strategist at B. Riley Wealth Management. Dietrich painted a worrisome picture of the stock market, suggesting the potential for a decline even greater than the ones witnessed in the early 2000s and 2008, potentially making it the worst market crash in Wall Street’s history. Dietrich highlighted historically high valuations, such as the S&P 500’s price-to-earnings ratio and the inflation-adjusted Shiller PE ratio, as evidence of overpricing. Additionally, he pointed out the low dividend yield, which implies a focus on short-term gains rather than long-term investment strategies.

Dietrich also drew attention to the investor enthusiasm surrounding artificial intelligence, comparing it to the dot-com bubble of the late 1990s. He expressed concerns about a similar burst, while highlighting the recent surge in the “Buffett Indicator.” This metric, favored by Warren Buffett, measures the ratio between a country’s total stock market capitalization and its GDP. The indicator suggests that stocks are approaching dangerous levels, as it is currently at 188%, close to Buffett’s threshold of 200% where he believes investing in stocks becomes risky.

Given these warnings from Zeberg and Dietrich, it is clear that there are concerns about the current state of the market and the potential for a severe crash. Investors should carefully evaluate their portfolios and consider adjusting their strategies to mitigate potential risks.