Or will it? "Predictions are very difficult especially about the future!" Right? So let's dive in.
What is certain is that the current imbalance cannot last. 2024 will bring major changes. But what king of changes? Economic tensions are rising fast. Compared to that, are interest rates so important? 30 years ago the answer would have been yes. Now with the utterly rigged markets we have, probably not so much.
The real question is: Will the black swan of 2024 be natural or artificial? Because the market are so well managed nowadays, a "mistake" as in 2008 cannot happen again. The Central Banks will immediately flood the markets. Knowing this, market players are speculating like there is no tomorrow, or rather no risk, which itself creates its own risk. But probably not enough of it. Just another bubble on top of existing ones.
What is more concerning is that the previous bubbles, real estate in America and especially in China are already popping and acting as a drag on the economy. But as the example of Japan shows, this will hinder growth in the long term, not precipitate a recession in the short term.
To get a depression, something significant has to happen. If it cannot come from the market, then it will have to be either geostrategic or artificial.
As for geostrategic, Israel will do its very best to inflame the Middle East and the US will try weakly to resist being dragged in. Easy prediction since it is where we are right now. In all respects, we are already in the early stage of a third world war. It is a war by proxy for now but can quickly degenerate. The ongoing economic war will add to the pressure then the recession early next year will further increase that pressure until it becomes unbearable. (which won't be so hard in democratic societies, especially in Europe.)
Let's not forget that ALL wars are instigated and that those who raise the tensions also tend to be the ones who benefit in the end from the immense redistribution of wealth. We are most certainly heading towards such troubled times. My best guess? April to July for the apex of the crisis but it really could come at any time as the tensions will rise steadily month after month. Prepare for a bumpy ride.
Authored by Jack Phillips via The Epoch Times (emphasis ours),
An economist who focuses on consumer spending has issued a dire warning about the U.S. economy in the coming year.
"Since 2009, this has been 100 percent artificial, unprecedented money printing and deficits: $27 trillion over 15 years, to be exact," economist Harry Dent told Fox Business on Dec. 19. "This is off the charts, 100 percent artificial, which means we're in a dangerous state.
"I think 2024 is going to be the biggest single crash year we'll see in our lifetime.
"We need to get back down to normal, and we need to send a message to central banks," he said. "This should be a lesson I don't think we'll ever revisit. I don't think we'll ever see a bubble for any of our lifetimes again."
Mr. Dent, who owns the HS Dent Investment Management firm, told the outlet that U.S. markets are currently in a bubble that started in late 2021 amid the COVID-19 pandemic.
"Things are not going to come back to normal in a few years. We may never see these levels again. And this crash is not going to be a correction," he said.
"It's going to be more in the '29 to '32 level. And anybody who sat through that would have shot their stockbroker," Mr. Dent said, making references to the stock market crash in 1929 that led to the Great Depression throughout the 1930s.
"If I'm right, it is going to be the biggest crash of our lifetime, most of it happening in 2024. You're going to see it start and be more obvious by May.
"So, if you just get out for six to 12 months and stuff stays at the highest valuation history, maybe you miss a little more gains if I'm wrong. If I'm right, you're going to save massive losses and be able to reinvest a year or year-and-a-half from now at unbelievably low prices and magnify your gains beyond compare."
Mr. Dent's predictions of a market crash are nothing new. In 2009, he wrote "The Great Depression Ahead," a book that forecasted a significant market crash.
In the past few weeks, several analysts have been making similar predictions of a significant stock market crash in the near future.
"Based on prevailing market valuations, we estimate that poor total returns are likely for the S&P 500 in the coming 10–12 years, that equity market returns, relative to bonds, are likely to be among the worst in history, and that a market loss on the order of [minus] 63 percent over the completion of this cycle would be consistent with prevailing valuations and a century of market history," Hussman Investment Trust President John Hussman, who called the 2008 crash, wrote in a note in October.
Wrong Prediction?
However, in a recent note, investment banking firm Goldman Sachs raised its 2024 S&P 500 target by 8 percent, to 5,100, forecasting a tailwind for U.S. stocks from falling inflation and declining interest rates.
"Looking forward, the new regime of both improving growth and falling rates should support stocks with weaker balance sheets, particularly those that are sensitive to economic growth," the firm wrote late last week.
Federal Reserve Chairman Jerome Powell said last week that the U.S. central bank's consequential tightening of monetary policy is likely over as inflation falls faster than expected, and that a discussion of cuts in benchmark rates is coming "into view."
The shift from the Fed helped to push the S&P 500 near a record high and sent bond yields tumbling. Goldman strategists expect the Fed to cut rates by 25 basis points at each of its policy meetings in March, April, and May, followed by quarterly cuts that will bring down benchmark rates to a range of 4 percent to 4.25 percent by year-end from the current range of 5.25 percent to 5.5 percent.
The bullish outlook from Goldman Sachs comes as other firms have increased their expectations for interest rate cuts by the Federal Reserve. Bank of America Global Research, for example, now sees the Fed cutting rates by 100 basis points next year, beginning with a 25 basis-point cut in March, compared with its previous estimate of 75 basis points.
The U.S. central bank raised rates in a bid to offset decades-high inflation. Data provided by the Bureau of Labor Statistics shows that the Consumer Price Index that measures inflation rose by 0.1 percent in November 2023 on a seasonally adjusted basis and was up by 3.1 percent year over year.
Reuters contributed to this report.
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