New Delhi: US economist and HS Dent Investment Management founder Harry Dent has portended a market crash that will be worse than the 2008 crisis in the US which originated from subprime lending and had economic repercussions across the globe. Dent has forecast a 92 per cent decline in the tech-heavy Nadaq and an 856 per cent wipeout in the S&P, during an interview.
Changes in US economy will have an impact on markets
Against this backdrop, we talked to economists and experts about their views on Dent’s forecast. Economist Akash Jindal said that US markets are not in good shape. According to him, the US had 2 straight quarters of -ve GDP growth in 2022, indicating a technical recession.
Most countries were affected by the COVID-19 pandemic. After this, another blow was dealt to the US economy by the Russia-Ukraine War. Inflation surged and US crude prices soared in the aftermath of the war. Moreover, the US has been in deficit for multiple years, said Jindal.
This was seen in the country’s debt ceiling — its limit on borrowing — being enhanced twice over the past few years. US inflation has remained a cause for concern, prompting the Fed to keep the interest rate unchanged even contemplating another rate hike, said Jindal.
The US economy requires a lower interest rate, but inflation is keeping its hands tied. The US-China trade war has also hurt the US economy which is not doing good, leading to a slowdown in the US economy. According to Jindal, this could have broader repercussions for US markets. However, this is unlikely to match the stock market crash of the Great Depression or the 2008 subprime lending crisis.
There is likely to be the possibility of a decline in the Dow Jones Industrial Average or the Nasdaq, he said. The US may face a slowdown in recovery. However, a Fed rate cut is unlikely before September, he added. “If US’ growth is in question, it tends to impact the stock market,” said Jindal.
‘Dent’s forecast not based on facts’
KCC Group founder and economist Sharad Kohli said that he does not agree with Harry Dent’s prediction since such claims should be backed by research. Dent’s statement that markets are in a bubble is rather vague, said Kohli. According to Kohli, steep market corrections may take place in the event of a geopolitical conflict. He said markets fluctuated in the aftermath of the conflicts in Gaza. The North-South Korea conflict and any development in the South China Sea may also lead to stock market upheavals.
The stock market also plunged on the day of the 2024 Lok Sabha result but received the very next day, Kohli pointed out. “It is difficult to predict events,” he said. Kohli stated that Dent’s forecasts should be based on more concrete data instead of just citing the Great Depression or the 2008 market crash.
The markets may undergo a major correction in the event of a geopolitical flare-up around the world. Dent has not shared a date, year or month for the potential crash. It is inappropriate to state that the markets may undergo 92 per cent market correction since markets are in a bubble. That may happen in the event of a geopolitical conflict.
Indian economists have a mixed view on US economist Harry Dent’s doomsday forecast of an impending market crash. Here’s what they had to say. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
