Top Strategist Jon Wolfenbarger Warns Of Stock Market Crash And Year-Long Recession: 'Market Highly Vulnerable To Falling To New Bear Lows'

The U.S. economy could be on the verge of a significant stock market crash and a year-long recession, according to market strategist Jon Wolfenbarger.

What Happened: Wolfenbarger, a seasoned market observer, anticipates a severe drop in the U.S. stock market and a prolonged recession. Wolfenbarger, with over three decades of investing experience, relies on a variety of economic indicators that suggest an impending downturn, according to a Business Insider report Tuesday.

Wolfenbarger, the founder of Bull and Bear Profits and a former JPMorgan banker, is particularly concerned about the consistent decline of The Conference Board’s Leading Economic Index and the longest stretch of an inverted yield curve in more than half a century. His forecast is more severe than The Conference Board’s, which predicts a two-quarter recession.

“The depth of the latest yield curve inversion has only been matched or exceeded by those preceding the Great Depression and the major recessions of the mid-1970s and early 1980s,” said Wolfenbarger.

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Wolfenbarger also warns of a bear market on the horizon due to falling earnings and overinflated valuations. Despite an upward revision in the fourth-quarter earnings per share of the “Magnificent Seven” – Apple Inc AAPL, Amazon.com Inc AMZN, Tesla Inc TSLA, Microsoft Corp MSFT, NVIDIA Corp NVDA, Alphabet Inc GOOG GOOGL, and Meta Platforms Inc META, the broader S&P 500 underwent a downward revision of 11%.

“The market is highly vulnerable to falling to new bear market lows,” Wolfenbarger said.

“Most investors do not see this coming, as they are being mislead by the persistent strength of a handful of megacap Tech stocks. They have already forgotten how much those stocks fell in 2022. We believe they will be reminded soon how much overvalued Tech stocks can fall in a recession.”

Why It Matters: Wolfenbarger’s forecast contrasts with the recent optimism expressed by other market analysts. The world’s largest asset manager, BlackRock Inc., upgraded its U.S. stocks rating from "underweight" to "overweight," anticipating an economic soft landing. This shift is contingent on the Federal Reserve’s success in initiating an economic soft landing, followed by the first interest rate cut since 2019.

However, other analysts have also expressed concerns about the U.S. economy. Dominic Konstam, a strategist at Mizuho, predicts a significant spike in unemployment rates by the end of the year, signaling an inevitable economic hard landing.

Additionally, Amundi, a European asset management firm, forecasts a slowdown in the growth of the U.S. economy, which could lead to a weaker performance from the leading mega-cap stocks in 2024. This prediction aligns with Wolfenbarger’s concerns about the overvalued stock market and the potential for a bear market.

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