Market Expert Predicts 100% Crash, Cites $1 Trillion Spending Cut, Tariffs

Investing in the market can be a complex endeavor, but the fundamental principle remains simple: knowing the direction of the market—whether it is going up or down—is crucial for making informed investment decisions. This lesson was imparted to me at a young age when my father simulated investing my pocket money in Australian gold shares. The real insight came later when he explained that understanding market trends is key to successful investing. Although it seemed simplistic at the time, this advice has proven to be invaluable over the years.

Market trends are often evident in long-term charts, such as the S&P 500, which shows a clear upward trajectory. This trend reflects the overall progress of the market. Even fundamentalists like Warren Buffett acknowledge that, in the long run, the stock market tends to rise. However, this does not mean that there are no corrections or crashes along the way. These events can cause significant medium-term pain for investors, even for those holding the most secure stocks and indices.

As an investor, one can choose to be a buy-and-hold investor, which has historically been a successful strategy. Alternatively, one can aim to avoid crashes by timing the market. This approach involves buying at the bottom of a slump and selling before a crash, which can lead to better returns. While it is challenging to time the market perfectly, it is possible to avoid major crashes and buy at advantageous points. This strategy has been effective for me since the dot-com crash, with only one instance where I exited a correction that did not turn into a full-blown crash.

Currently, I am 100% out of U.S. equities and about 70% out of my non-U.S. portfolio. The remaining investments are in sectors that are expected to be more resilient during the current downturn, such as defense, agriculture, and physical gold ETFs. However, I may go 100% cash depending on the market's next moves. Being in cash is not ideal, but in a crash, everything gets crushed. Only special situations have a chance of not getting sucked down with the general market. When a real crash happens, everything can turn to dust, and the bigger the crash, the broader the devastation. Normality does not apply in a crash.

I believe this correction will become a crash, and that crash will turn into a sustained bear market. By “bear market,” I mean in the classic sense—a market trending downward over an extended period—not the modern, clueless definition of a market following a crash. This bear market could be exceptionally bleak because prices are so high that even a fall to long-term average valuations would feel catastrophic. This outcome is not inevitable, but avoiding it will take a near miracle.

Risk assets do not like risk and chaos, and unfortunately, chaos is prevalent. Consider the proposed cut of $1 trillion in U.S. government spending. That alone could push the U.S. into recession, even if some of those funds were being squandered in fraud and waste. That money still flows into the economy and juices it. If these budget cuts go through, they will put millions on the unemployment rolls. The Trump tariffs will and must spike prices, cutting U.S. spending power, worsening the recession, and triggering a global downturn. We’ll see higher prices but no increase in money supply—unless the Federal Reserve launches a QE bazooka. Either way, what happens then? Budget cuts and tariffs are a double whammy that risk leading to a depression. The economy tanks, unemployment rises, and government tax revenues collapse.

If that weren’t enough, escalating geopolitical tension will only add to the economic strain. How can all these overlapping factors combined not throw the U.S. and global economy into turmoil, creating a negative feedback loop? We don’t even have to guess the direction of interest rates, the value of the dollar, or global appetite for U.S. debt. The answer is already obvious. It has to be down—unless the angels sing. So let me attempt a projection as a benchmark for what happens next. It’s ugly, but it’s simply a roadmap. Unless there is a sudden outbreak of sanity, we are in for an almighty crash. It’s extremely hard to judge just how deep that crash will be. Since the global financial crisis, market drivers have evolved from free-market dynamics to central banking policies, and now to political chaos. That chaos has no end in sight.

At the very least, all investors should get their affairs in order. Face it, when politicians tell you that what they’re doing will cause “short-term pain,” history tells us that what’s coming next will be epic—and not in a good way.