Markets are in the final “explosive” phase: Henrik Zeberg

Henrik Zeberg, chief macroeconomics economist at Swissblock and author of The Monetary House of Cardslaunched a blunt projection for the economy and the markets.

In his opinion, the current enthusiasm is disproportionate and a recession is looming in the United States. But he sees room beforehand for strong upward momentum in the stock, as detailed in a recent interview.

For Zeberg, the central point to evaluate economic health is not the financial marketsbut the job offer. “The fewer jobs that are created, the worse the economy is,” he said.

Zeberg stressed that private job creation is the most direct way to measure the economic pulse. “When we talk about where the economy is, the easiest way to look at it is to look at job creation, especially private job creation,” he said.

In that sense, he focused on the most recent data available on private job creation in the United States, corresponding to December published last week. The figure was 41,000 positions, he explained.

Deterioration of employment and consumer

According to the economist, the number is worrying when analyzed in historical perspective. “If you look at history, you can see that 41,000 is not a good number,” he said. And he added that the long-term trend offers an even clearer signal.

“If you look at the 12-month moving average, it is now below what we saw before each recession in the last 10 or 12 recessions, even though the economy is much larger today,” he said.

“Nothing falls in a straight line, there are always ups and downs, that’s why we look at moving averages,” he explained. And he added: “Today these averages tell us that we are not in an open recession yet, but we are in a clear deceleration, and a rapid one at that.”

The economic deterioration is also reflected in consumption. Zeberg warned that the impact is not uniform and that it disproportionately affects those outside the wealthiest segment.

He argues that the American consumer, especially those outside the richest 10%, is worse off today than before the 2008 financial crisis and even before the Great Depression of 1929.

In his opinion, this contrasts with the dominant perception in the markets. “People have a very distorted view of what is happening right now,” he said. He explained that many investors focus on artificial intelligence, big technology companies and the stock market. «They think everything is fine, but it is not.»

What happens, as he indicated, is that liquidity grows despite the fact that there are bad economic signs. So he believes that it is a matter of time before the rise that stocks are experiencing is reversed.

Zeberg clarified that This phenomenon is not exclusive to the United States.. It also happens in other places like Europe, he noted. However, he acknowledged that U.S. data tends to be more visible and accessible.

Disbelief about the economy

The economist described the current moment as a dangerous transition. “We are in an economy that is sinking slowly, like a ship, and that at some point will enter a full recession,” he stated.

In his opinion, the Federal Reserve (FED), the US central bank, You would be underestimating the problem by focusing on inflation. “She still doesn’t seem to understand this and remains focused on inflation, which is a lagging indicator,” he said. “When the economy falls, inflation falls next.”

Zeberg estimated that real inflation is around 2.7% and anticipated an additional slowdown, as a result of the economic slowdown. “The models that try to anticipate it show that the price index could fall below 2%,” he indicated.

This context generates what he calls a “twilight zone.” It indicates that the stock market is doing relatively well and rising strongly. Furthermore, bitcoin (BTC) and cryptocurrencies are not collapsing, “so it is assumed that everything is fine.” However, he insisted that the true economic engine is failing.

“That engine is the second and third class passengers of the Titanic,” he commented. “More and more we see that they are having difficulties, and this is going to end up impacting the economy.”

In this sense, Zeberg warns that The stock market could be near an extreme point. “We are in the final stages of a blow-off top in the stock market,” he said.

And blow-off top or explosive top is a final phase of a bullish cycle in financial markets, characterized by very rapid and pronounced price increases, driven more by euphoria and expectations than by economic fundamentals.

“We find ourselves in an inflationary environment, where the risk is still present,” he said. Therefore, he considered that, as part of a blow-off top, the S&P 500 stock index may rise 18-20% from here.

The US dollar will strengthen

The financial analyst added that “gold and silver are beginning to show some signs of this endgame.” These assets, which are rising, are usually boosted by periods of economic uncertainty, as reported by NoticiasVE.

Zeberg stressed that, in his opinion, there is no universally winning asset. “In the long term, there may be different types of regimes,” he explained. “In certain regimes it is convenient to have cash, in others it will be good to keep gold and silver, and in others something else, like bitcoin.” For this reason, he concluded: “It is not always good to maintain the same thing all the time, it is about navigating between these different regimes.”

According to his view, in a situation where everything falls apart, cash liquidity is needed. Therefore, he believes that «we will enter a dollar regime, and this regime is not based on gold, silver or bitcoin.»