Major crisis warning for the US economy: Experts point to a 1929-style collapse
Potential financial crisis scenarios in the United States are causing concern in many parts of the world. Analysts state that a large-scale economic strain in the US could also impact global markets.
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According to an analysis by US-based Universa Investments, the current upward trend in Wall Street could trigger a further 20 percent increase in the S&P 500 index. However, fund managers warn that a stock market crash of historical proportions could occur following this rally. Mark Spitznagel, the founder of Universa, stated that they expect a serious decline after the index reaches the 8,000-point level. Spitznagel drew attention with his words: "I expect a crash of about 80 percent... but that will be after a massive, euphoric, and historic rally. We are in the middle of it right now, we haven't reached the end."
Universa Investments is known as a fund that specializes in providing protection against rare but devastating shocks in financial markets. Founded in 2007, the fund, with its 20 billion dollar portfolio, achieved significant gains during the market fluctuations experienced, particularly during the 2020 pandemic period. Fund manager Spitznagel emphasized that their clients use Universa almost like an "insurance policy," saying, "By using us, our clients are actually able to stay in the market for the longer term, which is a paradox."
FED POLICIES AND CONCERNS ABOUT THE FUTURE
While the S&P 500 index has shown an increase of approximately 13 percent since the beginning of the year, the US Federal Reserve's recent move toward interest rate cuts has increased optimistic expectations in the markets. Experts agree that the Fed may implement additional interest rate cuts to prevent a slowdown in the economy. However, Mark Spitznagel expressed that the true effects of the loose monetary policies implemented after 2008 and the interest rate hikes following the pandemic have not yet fully emerged in the financial system. Spitznagel stated, "We will see the results of this... It takes time."
Spitznagel also noted that the Fed's effort to maintain economic growth while keeping inflation under control has increased optimism in the markets, but he predicts that an inevitable collapse will occur following the current rise.
Economic circles warn that a potential collapse in the US could mark the beginning of a new era not only domestically but also in the global economy. With the effects of the Great Depression of 1929 still in memory, the devastating consequences that a similar wave would create today are causing curiosity and anxiety around the world.