Amidst the prevailing uncertainty about the future course of the United States economy, a specialist has sounded the alarm that the Federal Reserve’s actions may prove inadequate.
Specifically, the macroeconomist Henrik Zeberg voiced his apprehensions in a post dated July 3, cautioning that the Fed’s reaction to the ‘decelerating economy’ is markedly belated, potentially precipitating the most severe economic downturn since 1929.
Zeberg underscored his unease regarding the Federal Reserve’s emphasis on inflation, which, in his view, is a trailing indicator within the economic cycle.
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Zeberg anticipates that the Federal Reserve’s forthcoming injection of capital will instigate a fleeting market surge—a vigorous and short-lived escalation—prior to the onset of a significant recession in the last quarter of 2024.
“The Federal Reserve will intervene – yet their response is egregiously overdue. The so-called experts are fixated on ‘inflation,’ a delayed indicator in the Economic Cycle. Prepare for the largest crash since 1929,” he stated.
**Indicator of Non-Manufacturing New Orders:**
Zeberg’s forecast is grounded on the non-manufacturing new orders indices in the United States, which historically precede substantial market downturns, drawing parallels between previous financial collapses and the current scenario.
Chart of US non-manufacturing new orders indices, courtesy of TradingView and Henrik Zeberg.
The analyst’s shared data pinpoint periods that led up to significant crashes, succeeded by steep descents. These phases before the crash are marked by a decline in new order indices, signaling a contraction in economic activity.
Currently, the data indicates the emergence of a similar pre-crash pattern, with the indices on a downward trajectory, denoting a reduction in new orders across manufacturing and non-manufacturing sectors. This corroborates Zeberg’s forecast of an already slowing economy.
Notably, the Relative Strength Index (RSI) during past pre-crash intervals fell below 50, indicative of diminishing momentum. At present, the RSI is once again nearing this pivotal mark, suggesting a slackening in market dynamics.
**Market’s Blow-Off Top:**
Zeberg’s projection of a market ‘blow-off top’ preceding a major crash depicts a sharp yet ephemeral spike following the Federal Reserve’s intervention, a pattern also observed before prior significant downturns where short-term capital injections led to transient market booms followed by crashes.
It is important to note that Zeberg has consistently held that the US economy is on the brink of a recession in the latter half of 2024. As reported by Finbold, the economist has cautioned that a temporary market rally could occur before the recession impacts both the stock and cryptocurrency sectors.
**Disclaimer:**
The information provided herein should not be construed as investment advice. Investment activities are speculative and carry inherent risks.
