Top economist Henrik Zeberg has warned that the current stock market rally may be laying the groundwork for one of the most catastrophic crashes in history.
According to Zeberg, the rally, led by the S&P 500, is forming a “blow-off top,” a steep and rapid rise in prices that typically precedes a sharp downturn.
In an X post on July 2, Zeberg noted that this final leg of the rally will be one “for the history books,” both in terms of its intensity and the severe economic fallout expected to follow.
Previously, Zeberg had projected that the S&P 500 could climb further from current levels, targeting a peak of around 6,800 points in the short term. As of press time, the index stood at 6,219, up 0.3% on the day and nearly 2% over the past week.
“I think the blow-off top is still going, and you see it in various markets around the world. <…> Actually [markets] have seen new all-time highs after everybody kind of dismissed that in April, we could see that. Now we are seeing it,” he said.
He pointed to strong momentum across global markets, many of which have recently reached fresh all-time highs, as evidence of a continued bullish trend.
However, while Zeberg remains optimistic in the short term, his long-term outlook is far more bleak.
Recession on the horizon
The expert has cautioned that the explosive rally will ultimately be followed by the worst recession and bear market since the 1930s, as mounting economic stress takes hold in the U.S.
“We’re getting closer and closer [to a recession]. There are more and more signs now that the deterioration is going through,” he added.
Zeberg highlighted deepening cracks in the housing sector and early signs of weakness in both the labor market and the broader real economy. He believes these are early indicators of a gradual deterioration that could soon accelerate.
The economist also expects this market euphoria to spill over into cryptocurrencies before they, too, experience a dramatic collapse.
His outlook comes during a year marked by volatility driven by trade tariff conflicts and geopolitical tensions.
With the effects of those headwinds now easing, markets have responded positively, with the benchmark index recording several consecutive days of gains. Bullish momentum is expected to continue into July.
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Source: https://finbold.com/this-blow-off-top-will-be-one-for-the-history-books-warns-top-economist/