The Biggest Economic Crash America Will Ever Experience Is Coming, Warn Multiple Financial Experts
The comments below are an edited and abridged synopsis of an article by Arsenio Toledo
Many prominent businessmen and entrepreneurs are predicting that an economic crash, bigger than any the US has experienced, lies ahead. On Wall Street, a leading financial analyst has already predicted that the stock market is about to experience a summer of pain.
On May 18, the stock market experienced its largest daily drop since 2020. All three major benchmarks (the Dow, the Nasdaq, the S&P 500) closed sharply lower as consumer stocks took a beating.
One company badly affected was Target, whose stocks tanked by nearly 25% after reporting a big earnings miss.
Scott Minerd, chief investment officer for Guggenheim Partners Global, said that he does not see the stock market recovering any time soon, and that much of the blame can be pinned on the Fed.
The Fed has made it clear that it wants to keep raising interest rates even though this will likely cause significant disturbances to equity markets and elsewhere. Fed Chair Jay Powell said the bank’s main goal is controlling inflation and restoring price stability.
Minerd believes that the Fed will continue raising interest rates until it sees a clear breaking of the inflation trend, and that it is willing to raise rates above the neutral rate.
The neutral rate refers to a level of interest rate that doesn’t stimulate or restrain the economy. If the Fed goes over this rate, it will ultimately constrict economic activity, leading to a recession.
“With the passage of time as the Fed continues to hike [interest rates], we will find ourselves experiencing the effects of increasingly restrictive monetary policy,” warned Minerd. “Well before it reaches this terminal rate the Fed will increase the risk of overshooting, causing a financial accident and starting a recession.”