A prominent macroeconomist, Henrik Zeberg, has reiterated his prediction of a looming recession that will be preceded by a final surge in key market sectors, but can potentially be the worst the market has seen since 1929, the worst bear market I Wall Street’s history.
In a recent interview on the Soar Financially YouTube channel, the economist specifically highlighted the S&P 500 index, which he believes could experience further gains before the significant drawdown. Earlier this year, Zeberg projected the index would climb to 6,100, while it has year-to-date climbed 17.8% to now stand at 5,590.
However, the economist is now warning that while the market is experiencing a surge, it hasn’t reached its peak yet. He believes a significant “blowoff top” is still on the horizon and will precede a recession.
During the interview, the economist said he believes that the business cycle is now turning over. With leading indicators pointing to a recession for some time now. Zeberg remains confident that a recession will materialize by the end of the year, likely coinciding with the market peak in September or October.
He acknowledged the current economic and labor market strength exceeding some expectations, but maintained that a downturn is inevitable.
The macroeconomist noted that while being long on the market has been the correct approach so far, he believes this is set to change in the near future, as Finbold first reported.
Notably, his words come after those of Paul Dietrich, the chief investment strategist at B. Riley Wealth Management, who recently painted a concerning picture of the stock market, suggesting a potential decline far exceeding those seen in the early 2000s and 2008 and potentially the worst one Wall Street has seen over the past century.
He pointed to historically high valuations, including the S&P 500’s price-to-earnings ratio and the inflation-adjusted Shiller PE ratio, as evidence of overpricing and added the low dividend yield suggests a focus on short-term gains over long-term investment.
The strategist compared the current investor enthusiasm surrounding artificial intelligence to the dot-com bubble of the late 1990s, raising concerns about a similar bust, while noting a recent surge in the “Buffett Indicator,” a metric favored by Warren Buffett that measures the ratio between a country’s total stock market capitalization and its GDP, which suggests that stocks are approaching dangerous territory as its at 188%, close to the 200% mark where Buffett believes buying stocks is “playing with fire.”
Featured image via Unsplash.
