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Economist Harry Dent: Dow Could Plunge 17,000 in 'Once in a Lifetime' Market Crash


By    |   Tuesday, 13 December 2016 05:45 PM

Economist Harry Dent is warning savvy investors that the stock market’s record-setting run may be only be setting the stage for an inevitable crash.

"I think this is going to be a stock market peak of a lifetime followed by a crash very similar to the early 1930s. This happens once in a lifetime," the Dent Research founder recently told CNBC.  "I think this is the last rally in this bull market," he said.

The Dow Jones industrial average closed Tuesday at its seventh consecutive record high and moved closer to 20,000 points. The Dow is fewer than 90 points from crossing 20,000. The Dow has climbed about 9 percent since the Nov. 8 election, with gains fueled by expectations that Donald Trump will reduce taxes and regulation and stimulate the economy.

Dent speculates that investors may be having just a little bit too much faith that Trump will fulfill all of his campaign vows to the letter.

"The markets are assuming that he is going to create three to four percent growth on a sustainable basis," said Dent. "It is demographically impossible.... When the markets figure this out, they are going to crash," he said.

Meanwhile, some investors see the 20,000-level on the Dow as a psychologically important signal of broad positive sentiment.

The U.S. stock market's sharp run has also been supported by positive economic data, including a strong labor market and S&P 500 companies' results, which in the third quarter snapped a year-long earnings recession, Reuters reported.

"Investors are encouraged by expectations that Trump and a GOP-controlled Congress will enact pro-growth policies and we're seeing modest inflation creep in while housing remains stable and wages continue to firm," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

But Dent begs to differ. "You can't have stocks keep going up at this rate when earnings are going nowhere," said Dent. ""I think it [Dow] is going to end up between 3000 and 5000 a couple years from now."

Dent, who is also the editor of the “Economy and Markets” newsletter, says there are other major factors which will spark an “epic” pullback.

"I think the trigger is people seeing sometime early next year that Donald [Trump] will not be able to do everything that he said, and the economy may be slowing by then," he said. "The biggest trigger, kind of like the subprime crisis in 2008, is going to be Italy. Italy is bankrupt. Its bonds are trading at lower rates than ours which is ridiculous."

Dent’s worries aren’t only domestic. China “has the greatest real estate bubble, an overbuilding bubble, in all of modern history. That's going to blow," he said.

Ironically, he explained that this could also be the best time in decades to re-position for huge gains. "In the next few months, investors will have the best opportunity to switch their investment strategies and profit dramatically," he said.

Dent advises savvy investors to sell their stocks and buy bonds. He recommends 30-year Treasuries and triple-A corporate debt.

However, Dent is known for making eye-popping forecasts but also admits he’s not always correct. "I make bold forecasts, and especially with things like [quantitative easing] and massive government intervention — yes, I'm going to miss some things. But, I have the guts to make these bold calls," argued Dent. "We've been right about gold. We got people out in late April... I think could see $700 in a year or two."

But Dent is far from the only investment guru to warn about the recent high-flying market.

Billionaire investor Carl Icahn thinks the stock market’s celebration since Donald Trump’s presidential victory may have “gone too far” as the Dow Jones Industrial Average nears the 20,000 milestone.

"It's gone too far," Icahn recently told Poppy Harlow on CNN. "I personally think it's a little overdone," Icahn said about the stock market rally.

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Economist Harry Dent is warning savvy investors that the stock market’s record-setting run may be only be setting the stage for an inevitable crash.
harry dent, dow, stocks, crash
Tuesday, 13 December 2016 05:45 PM
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