The first quarter comes to a close today with major averages at or near multi-year highs. Expect "substantial" further gains for stocks before a "major top" occurs in late summer, says noted forecaster Harry Dent, founder of HS Dent and The Dent Method.
The good news, for those long, is Dent predicts the Dow will trade as high as 13,200 by mid-summer and the S&P 500 as high as 1430, or more-than 7% above current levels. The bad news is "then we could see another major crash," Dent says, forecasting the Dow could trade as low as 3300 in a worst-case scenario. "Bubbles go back to where they started or a little lower," he says. "The stock market bubble started at (Dow) 3800 in late 1994."
While Dent predicts the Dow's crash will play out over several years, he sees clear and present danger in gold, silver, oil and other commodities. "All investors should lighten up on or sell oil, silver, and gold as the U.S. dollar looks like it has bottomed and should rise ahead," he writes in the March issue of HS Dent Forecast.
In the accompanying video, Dent further explains his thinking for why commodities will stumble ahead of stocks, which is the opposite of what happened in 2007-08. In sum, he believes efforts by global central bankers to fight inflation — with the notable exception of the Fed -- will hurt growth in emerging markets as well as demand for many commodities.
As for the Fed, they are "checkmated," Dent says, suggesting the Ben Bernanke & Co. are damned if they do QE3 -- because the bond market will freak out -- and damned if they don't -- because the economy and financial markets are so dependent on easy money.
Stay tuned for additional segments to hear Dent's views on the economy, housing and the deflationary pressures detailed in his latest book The Great Depression Ahead, a bookend to his 1992 best-seller The Great Boom Ahead.
- S&P 500
- Ben Bernanke
- emerging markets
- stock market bubble
- financial markets