2024: Crash of a Lifetime?

One economist is calling for a 92% crash in the NASDAQ. Is the recent pullback just that, or are major cracks starting to form?

The end of the year has provided us lacklustre economic data and a sharp retracement in equities. The slight rebound leading up to Christmas day was only temporary, and markets have just broken even lower.

Last month, the United States revised its third-quarter gross domestic product growth to 4.9%, down from the previous estimate of 5.2%, falling short of the anticipated 5.1% rise. Additionally, the Philadelphia Fed manufacturing survey reported a weaker-than-expected reading of -10.5, contrasting with the projected -4.0, indicating ongoing challenges in the sector.

-U.S. Dollar Index – break of monthly support

The weakened dollar, reflected in the U.S. Dollar Index, dropped 4% in the last two months. This further contributed to the upward movement in gold. Simultaneously, Treasury yields have increased last month. This can typically have a bearish impact on gold due to its lack of interest, yet it has not seemed to affect gold demand so far. The U.S. two-year note exhibited a yield of 4.347%, marking an increase of 0.8 basis points, while the yield on the 10-year note rose by 4.9 basis points to 3.897%.

The surprising factor currently at play in markets is the disparity between what the Fed says it will do and what the traders think it will actually do. In other words, distrust in the Fed. The market is now pricing in a total of 160 basis points of rate cuts this year. The Fed's own dot plot only calls for 75. As time passes, this disparity will be forced to be corrected to the upside or downside. The sheer size of this disparity in outlooks could mean a resilient environment if markets are right, or a painful correction downward if they are being exuberant.

Economist Harry Dent, in a recent interview with Fox News Digital, has stated "I think 2024 is going to be the biggest single crash year we'll see in our lifetimes." He noted that since 2009, there has been unprecedented money printing and deficit spending. The current market prosperity is 100% artificial according to him.

The first signs of the bubble bursting are already here according to him. He references 2022 when the NASDAQ was 38% lower. He thinks that this year will be the “B wave” of the crash.

NASDAQ 100 – 1 day chart

Dent compared the current conditions to previous bubbles but said that this one is magnitudes worse. He said that the roaring 20s bubble was not an everything bubble and that the 2008 real estate bubble was barely a bubble. His shocking prediction calls for an 86% crash in the S&P and a 92% crash in the NASDAQ.

Mr. Dent attributes the coming crash to a huge overstimulation of the economy during covid, followed by aggressive tightening. The effects of the tightening will start ripple through and be felt the strongest in 2024 according to him. For those looking for a soft-landing or a mild recession, Dent said '...Not a chance in Hades'.