The Trump victory-fueled, post-election market rally has investors cheering for now. However, outspoken economist Harry Dent is still bearish about America’s private debt and the future of its economy, arguing that the euphoria won’t last long.
"I can tell you one thing: bubbles never, ever end well. There's no way to go from [an] extreme bubble and have a soft landing. Now, that's what seems to be happening right now, and we'll see. But I tell people, give [it until] 2025," Dent told Fox News Digital one week after Election Day.
"I think the truth will be told next year whether they can let down this bubble without causing a crash, because I can tell you, [it’s] never happened in history. And I can't even compare past bubbles to this bubble, given how global and pervasive it is."
Former President Trump’s victory over Vice President Kamala Harris in the 2024 presidential election catapulted U.S. stocks to record highs, fueling the best week for the market of the entire year.
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Even so, Dent isn’t budging from his June prediction that an "everything" bubble could burst in mid-2025. What's more, he now argues that Trump's fiscal policies won’t be enough to prevent a cyclical crash tied more to private than federal debt.
"Obviously, he's seen as pro-business and yes, tax cuts – everybody likes tax cuts. But we already have the biggest runaway, 16-year streak of deficits. We have not seen a balanced budget since 2001 or something like that. It's just crazy," Dent said.
"And I think that's the big risk here, that Trump maybe seems to be a good thing to get the economy going," he continued, "but if he cuts government spending, I'd say that's going to start a slowdown that will build on itself."
Politicians can’t prolong the inevitable, the economist added, while stressing over the likelihood of a "very nasty downturn when it finally is allowed to happen."
"COVID was the big thing, and I think that's where central banks and governments made a mistake," he said. "They overreacted to COVID… That would have been a good time to let the economy take a rest and let off a little steam. But no, they doubled down and stimulated harder than ever. And then they suddenly get 9.1% inflation."
Dent estimates that private sector debt in the U.S. amounts to $630 trillion in financial assets, growing five times faster than global gross domestic product. The "trillion-dollar question" isn’t a matter of whether a market crash happens, but, rather, when, he believes.
"I know the best remedy for the economy. It's called a recession, or even a depression at times," Dent noted. "This will wash out [and] a lot of bad debts will fail. That's what happens in a recession. It's healthy to borrow and for companies to invest equity capital, as well, in growth in a boom. But the recessions come along, or occasionally a depression, after a bubble boom. And this is a bubble boom."
"So people have lost track, especially central banks who are run by economists who, I always say, look like they… have never run a business… Failure is the secret to capitalism. It's not just the opportunity to innovate. It's too [quick to] allow failures to happen and flush them out of the economy. And that's what we haven't [done]. We haven't flushed in 16 years."
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Overvaluation in the market ultimately hurts "the No. 1 economic indicator that almost nobody looks at": money velocity, which is defined as the rate at which domestic consumers and businesses exchange money in an economy.
"Money velocity has been dropping like a rock since 1997, right in the middle of the first bubble to form… it just shows that bubbles are not healthy," Dent said.
The generation that could suffer most from a market crash next year is Baby Boomers, many of whom are entering retirement and relying on their portfolios.
"If all these financial assets go down that they hold for their retirement, and they're making less income because they quit their job, or they're just on some minor pension or something, they're going to be in deep trouble… But I'm telling you, if I'm right about this crash, and the Treasury bonds go up as a safe haven, they will do nothing but go down for the rest of our lives from there, because low inflation is not a good environment for them," the economist explained.
"So I think the next few years is likely to be ugly. The question mark is, when does the darn thing start?" Dent posited. "I think the central banks know this better than anybody. They just can't say it because they don't want to scare anybody."
If anything carries markets through a strong 2025 start, it’s bitcoin. Dent told Fox Digital he’s purchased more of the cryptocurrency since his last interview in June.
"But I think that short-term, I would have a hard time buying anything else aggressively if we had the type of crash I talked about, because bitcoin could go all the way back down to the 15,000, 16,000 levels, the last major low."
"I do my long term projections comparing Bitcoin to other breakthrough new technologies like the dot-com revolution of the late 90s, that bubble, and what came after it. Bubbles finance new revolution. So they're a good thing," Dent added. "Bitcoin, I see going up to 800,000 to 1 million by 2037 to '40. So I've got a long way to go. So, boy, if that went down to 15,000 or even 20 or 25, that would be the buy of a lifetime. It'd be hard for me to buy anything else in those prices."
Right now, market traders are "going along" with the post-election bubble even though Dent compared it to being on the Titanic.
"When everybody gets on the boat, that’s when the Titanic sinks. So I think everybody's in the boat about now," he said.
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"Look at reality, look at the charts and see how much again, I'm just talking about housing going back to 2012. That's [a] 62% crash in housing, which would be twice as bad as the 2008 crisis. And that was bad on most people," Dent said.
"Stocks, just going back to 2009, that's 89% on the S&P 500 and 94% on the Nasdaq. That's a total wipe-out. That's 1929 to '32. You've got to at least acknowledge that this is a possibility here."
