‘Markets are living on borrowed time’ – Economist Zeberg warns of gigantic crash

According to economist Henrik Zeberg, the stock markets are heading for a dangerous denouement. In his most recent analysis, he states that the current euphoria in the financial markets is a “final blow-off top”, the final part of a years-long credit-driven bubble.

Stocks rise, foundations shake

Zeberg, known for his gloomy outlook, writes on his Substack that the gains in stocks, real estate and crypto are dangerously disconnected from the underlying economy. While investors celebrate gains, he warns that these gains are “a credit-driven illusion of prosperity.”

According to him, the current situation is the direct result of the policies after the 2008 financial crisis. Central banks then cut interest rates to zero and pumped trillions into the markets through quantitative easing. That led to rising prices in virtually all risky assets, while wages, productivity and economic growth lagged.

US markets extremely overvalued

According to Zeberg, the United States in particular is the epicenter of this bubble. Since bottoming in 2009, the S&P 500 has risen more than 900 percent. The total stock market value of American shares has now exceeded 225 percent of gross domestic product (GDP). That is more than during the peaks in 1929 and 2000.

House prices are also well above pre-credit crisis levels. Tech companies without profits are trading at sky-high valuations. According to Zeberg, everything points to the end of a historically long bull market, with the current rally as “the last convulsion”.

Central banks make it worse

According to him, the markets have become completely disconnected from economic reality. While growth slows, stocks continue to rise. In the past, that pattern often preceded major crashes.

Zeberg also criticizes the trust that investors place in central banks. Years of monetary support would have led to reckless behavior, too much debt and a false sense of security. This makes the system extra vulnerable to shocks.

‘Illusion of wealth can quickly evaporate’

He warns that much of today’s wealth is actually based on debt. When the economic cycle turns, that wealth could simply disappear.

According to Zeberg, the market is on the eve of a major correction. This could not only mean the end of the post-2008 period of cheap money, but also permanently undermine confidence in central banks.