Financial Author Harry Dent: Dow Will Plunge to 5,500-6,000

Thursday, 21 Aug 2014 11:55 AM

By Dan Weil

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There's no shortage of market participants who are bearish on stocks. But very few are as bearish as financial author Harry Dent.

He predicts the Dow Jones Industrial Average will plunge to about 5,500 to 6,000 in late 2016 or early 2017.

"Every bubble has taken [the market] to new highs—the 2000 tech top and the 2007 top," Dent told Yahoo. "Now we’re gonna top ... at just over 17,000 on the Dow." The index stood at 17,050.28 at midday Thursday.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

His predictions are based on demographics. He's particularly interested in 48 year-olds, as that's often the age of maximum spending.

When the number of 48 year-olds slides, so does the stock market, Dent said. And aging baby boomers are depleting that age slot. He also maintains that Federal Reserve stimulus has fuelled a stock market bubble.

"Every crash has taken us to new lows," Dent said. "So the last crash took us down to 6,442 on the Dow," and the next one should be lower, he said.

Meanwhile, stocks' dependence on the Fed's easing is dangerous, says Mohamed El-Erian, chief economic adviser to Allianz.

"The bet on central banks assumes not just their commitment, which I totally agree with," he told CNBC. "But . . . it assumes their effectiveness, that somehow central banks acting on their own will be able to deliver great economic outcomes."

And that's been a problem, El-Erian said. The U.S. economy has grown at an annual rate of only 2.2 percent since the recession ended five years ago.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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