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A glimpse of the muted Economic Winter Season ahead

Despite having a strong global economic stimulus, the country’s economic recovery has been at its weakest.

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Recently, I talked about how we have been in a muted Economic Winter Season. We may have had the greatest stock market bubble ever, but our economic “recovery” has been the weakest on record, despite the strongest, globally-concerted stimulus ever.

Here’s a chart comparing the real GDP for the 11 years from the 1929 top through the 1940 bottom to the 11 years from 2007 to 2018.

©Harry Dent

Notice how the cumulative GDP growth since 2007 is 19 percent? It was 20 percent from 1929 through 1940. That means this period has actually been slightly worse.

How could this be?

The clear difference is that the Great Depression started with the greatest crash in U.S. history, with stocks down 89 percent, 25 percent unemployment, and a GDP fall of 30 percent between 1929 and 1933.

Think of it like the Big Bang. The explosion came at the beginning and everything took shape from there.

The current Economic Winter Season also started with a stock crash and high unemployment: 54 percent loss in the markets, near 11 percent unemployment, and a GDP fall of 4.3 percent.

Mild in comparison…

But the recovery from 1933 to 1937 saw average real GDP growth of a whopping nine percent per year. We’ve managed to eke out just two percent per year. Then there was a less severe crash and mini-depression or great recession in 1938 that lingered into 1942. Stocks bottomed in 1942 and the next great long-term bull market began.

What does this mean?

The next chart shows real GDP on a 10-year moving average to smooth out the trends.

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©Harry Dent

Look at that remarkable difference: The period after 2007, with an average of two percent GDP, has already been lower than the extended recession and inflation trends of the Economic Summer Season from 1968 to 1982.

This tells me that this Economic Winter Season will go out with a bang (as opposed to beginning with one, like with the Great Depression).

A final deep depression, debt deleveraging and economic crisis will see a 20 percent-plus fall in GDP, 15 percent-plus unemployment, and a stock crash that could rival that -89 percent for the Nasdaq and maybe even the Dow.

Talk about ass-backward.

The good news

The good news is that my four key fundamental indicators are generally at their worst between 2020 and 2023 and turn up one by one after 2020. The Geopolitical Cycle turns up after 2020 as does the sunspot-driven Boom/Bust Cycle. The U.S. Generational Spending Wave turns up in 2023, making the 45-year Technology Cycle the last to flip, around 2032.

Hence, the worst of the next great crash is likely to occur by late 2020, and we won’t come out of it until 2023 or so.

After that, we should enjoy a stronger recovery and quick reforms that actually deal with the debt crisis this time.

Still, we won’t see as strong a recovery as that from 1933 forward because we face weaker demographic trends in the U.S. and developed world. The outstanding growth will occur in the emerging world, especially places like India and Southeast Asia.

I don’t expect that the central banks can create another heroic turnaround this time when their last “something for nothing” stimulus program fails so miserably. They didn’t deal with the debt and financial bubbles last time, so expect the worst ahead after this final bubble peaks later this year, or early 2020 at the latest.

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(Featured image by Marc Bruxelle via Shutterstock)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Harry S. Dent Jr. studied economics in college in the 1970s, receiving his MBA from Harvard Business School, where he was a Baker Scholar and was elected to the Century Club for leadership excellence. Harry grew to find the study of economics vague and inconclusive and became so disillusioned by the state of his chosen profession that he turned his back on it. Instead, he threw himself into the burgeoning new science of finance which married economic research and market research. Identifying and studying demographic trends, business cycles, consumers’ purchasing power and many other trends empowered Harry to forecast economic and market changes. Over the last three decades, he’s spoken to executives, financial advisors and investors around the world. He’s appeared on “Good Morning America,” PBS, CNBC and CNN/FN. He’s been featured in Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, American Demographics and Omni. He is a regular guest on Fox Business’s “America’s Nightly Scorecard.” Harry has also written numerous best-selling books over the years, such as The Great Boom Ahead, The Roaring 2000s, the Roaring 2000s Investors and The Demographic Cliff.In his most recent book The Sale of a Lifetime: How the Great Bubble Burst of 2017 Can Make You Rich (2016), Harry looks at the upcoming economic crisis and reveals how it could be the single greatest chance to build wealth we’ll ever see and how we can capitalize on such a unique and historical opportunity. He explains how many of the richest Americans in history have used this same kind of opportunity to quickly accumulate incredible amounts of money, in a short period of time.

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