The April tariff dip is not a buying opportunity, and the stock market phase starting in 2025 is not a time to hold on to one’s investments, according to the prominent American finance writer Harry Dent.
Indeed, the current year will feature a major crash that will start with a 30-50% crash – expected to materialize by the summer – in major indices such as the S&P 500 and the Nasdaq 100, as Dent revealed in a David Lin interview published on April 14.
This first crash takes us down into the summer 50% from the top on the NASDAQ and QQQ NASDAQ 100 and 40% on the S&P 500, so my message is: folks, it makes sense to sit through most corrections; this is not one of them, and we’ve got a bounce here where you can get out and at least be cautious in the summer. But, corrections and crashes like this tend to take at least two years and more like three years to play out, like (19)29 to (19)32, 2000 to 2002, the first tech bubble…
Furthemore, the initial phase is likely to be a prelude to a protracted downturn that will eventually take equities as much as 80-90% below their highs and ensure no new peaks are recorded for at least a decade.
Why the market could plunge as much as 90%
Dent also revealed that the coming crash is likely to be both long and deep because it has been artificially delayed by measures such as money printing and excessive debt taking and should have taken place between 2019 and 2023.
The finance writer also revealed that, despite studying such phenomena throughout his career, he has never seen a bubble as massive as the current one while warning investors that a soft landing is, essentially, not possible.
During the interview, Harry Dent also emphasized his belief that boom and bust cycles are necessary for free market capitalism – a system he deems to be exceptionally successful – to function, as the downturns help purge the anomalies that develop during bull markets.
The economy has to have recessions to clean things out, and we haven’t had one. I don’t count COVID, it was a few weeks, it was a minor thing, it was artificial. We haven’t had a recession to do this in 16 years, the longest time in history. The economists are playing God to the economy, and then free market capitalism needs to be free: first four letters of free market capitalism.
Similarly, the author and founder of HS Dent Investment Management emphasized that the boom that came after the Great Recession was artificial. Unlike the previous upswings, which were driven by large generations at their spending prime, it had no such organic backing.
How investors can weather the upcoming crash
Lastly, Harry Dent reflected on how investors can weather the coming storm. Instead of taking advantage of tariff swings – which he believes are relatively unimportant as the tariffs a trigger for the volatility, not its cause – they should sell equity and either seek the safety of cash, or turn to bonds.
Treasury bonds were the only winner in the end, so I’m like: you can either be in cash to be safe if you’re uncertain … instead of cash, I’d say look: treasury bonds are the most conservative long-term highest quality investment. Treasury bonds are the only thing that goes up when everything else goes down, as 2008 proved beyond a doubt.
To bolster his fixed-income argument, the author reflected on previous cycles that featured bonds reacting slower than stocks – thus allowing traders to act – performing mildly for a long time but then ending the cycle as the only clear winners.
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