Legendary Wall Street predictor makes bold claim about future of the American economy

A financial writer and stock market expert now says nan Federal Reserve will beryllium forced to initiate an emergency complaint trim up of its adjacent gathering successful September to tamp down connected nan wide selloff of equities successful nan past respective days. 

Robert Prechter, nan laminitis and president of Elliott Wave International, joined Neil Cavuto connected Fox Business Monday evening and said nan Fed missed a immense opportunity astatine its gathering past week to get up of nan marketplace calamity that continues to unfold.

'I deliberation there's gonna beryllium a astonishment complaint trim earlier nan September gathering because I deliberation rates person started falling faster,' he said. 

The past clip nan Fed made emergency complaint cuts were backmost during COVID, and galore experts judge 1 won't hap again now because it would awesome that nan US economy is successful unspeakable shape, perchance starring to moreover much marketplace scares. 

Back successful January, Prechter warned that having excessively overmuch optimism successful nan marketplace was dangerous. He said Monday that this optimism is now 'entrenched' and that nan world is seeing 'the astir overgrown marketplace ever.'

Following nan Friday jobs report, which showed unemployment successful July roseate to nan highest level since October 2021, markets worldwide went into a tailspin amid fears that nan US system is sputtering.

Monday's continued downfall was led by the benchmark Nikkei 225 scale successful Tokyo - nan 3rd largest successful nan world - which crashed by 12 percent this morning, nan biggest single-day autumn successful almost 4 decades.

The S&P 500 dropped 3 percent for its worst time successful astir 2 years. The Dow Jones reeled by 1,033 points, aliases 2.6 percent, while nan Nasdaq composite slid 3.4 percent.

All told, Bloomberg estimates that $6.4 trillion has been wiped from nan worth of world banal markets successful nan past 3 weeks.

Much of this could person been avoided if nan Fed had decided to trim rates astatine past week's meeting, according to Prechter.

'The Federal Reserve had a awesome opportunity past Wednesday to little their Fed costs complaint by a 4th point; they didn't return it,' he said. 'I deliberation that was a large mistake.' 

Now, economists astatine Goldman Sachs person raised nan likelihood of nan US slipping into a recession wrong nan adjacent twelvemonth from 15 percent to 25 percent, while analysts astatine JP Morgan put nan chances astatine 50 percent.

The Fed had been raising rates since March 2022 successful a bid to incorporate inflation, but 1 apical economist believes nan agency is suffering from passageway vision. 

The main economical advisor astatine Allianz, Mohamed El-Erian, blamed nan Fed for nan existent authorities of nan market, saying nan hikes are hitting nan system hard.

'I really do interest that we whitethorn suffer US economical exceptionalism because of a argumentation mistake,' he told Bloomberg TV.

Even if nan Fed waits until September to tiny rates, astir manufacture watchers judge a complaint trim is so coming.

JP Morgan analysts wrote successful a memo that because 'the Fed looks to beryllium materially down nan curve, we expect a 50 [basis point] trim astatine nan September meeting, followed by different 50 [basis point] trim successful November.'

Investors now besides judge that different awesome cardinal banks will travel nan Fed's lead and easiness rates much aggressively, pinch nan European Central Bank believed to beryllium cutting rates by 67 ground points by Christmas.