Expert Shares 7 Signals That 60% Crash Is Coming
- Jon Wolfenbarger says he is “very convinced” a recession is coming in the near future.
- He also says several indicators show stocks are due for a massive drop.
- He shared with Insider the indicators that will tell investors when to get out.
Jon Wolfenbarger doesn’t beat around the bush.
A stock-market crash is coming, he told Insider on Friday morning.
“I think the next
bear market
will be worse than 2008, which will make it the worst since the Great Depression,” the former Allianz Global Investors securities analyst said. “I’m not necessarily saying that’s starting yesterday or tomorrow or right now, but I think it could be starting now.”
He added: “The S&P 500 fell 58% in 2008-2009. I think it could be worse than that. Somewhere over 60%.”
But such mammoth claims require convincing evidence. Wolfenbarger, who now runs Bullandbearprofits.com, said there are seven indicators that make him so sure.
Perhaps most obvious is the current average valuation in the market — historically high by just about any measure.
The Schiller price-to-earnings ratio is near all-time-highs. Or there’s the Warren Buffett indicator, which is the ratio of total market capitalization to GDP. It’s currently 30% higher than it was during the tech bubble around 1999 and 2000.
Seeking Alpha
Next is investor sentiment, which has been mostly bullish since the end of March 2020. Wolfenbarger pointed out that over-bullishness is a contrarian indicator, meaning it signals a downturn ahead.
He cited the fact that the put/call ratio is near lows that haven’t been observed in nearly 15 years, meaning investors have recently been buying bullish call options relative to bearish puts at historically high levels.
Then there’s margin debt levels, which has seen 70% year-over-year growth. The last two times that happened were before the 2000 and 2008 crash, he said.
Third is what he thinks is a weak economic outlook. “It’s remarkable that industrial production and employment have practically flatlined the last 20 years, really since the tech bubble,” he said.
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