Real-time breaking news:Recently, a market forecaster warned that overvalued U.S. stocks could plummet and that a U.S. economic recession could come within months. Gary Shilling, president of the economic consulting firm A. Gary Shilling & Co, accurately predicted the 2008 financial crisis and served as the chief economist of Merrill Lynch. He is famous for making many accurate market predictions over the past four decades. He pointed out that the Shiller price-to-earnings ratio of the S&P 500 is about 45% higher than the long-term average, indicating that U.S. stocks are overvalued. He also warned that a handful of stocks account for a large portion of the stock market's current value, meaning investors "actually dislike other stocks and the economy as a whole." "This is a market rife with feverish speculation," Shilling said. In addition, Shilling cited a series of signs that a recession is approaching, including: continued declines in leading economic indicators, pressure on housing starts, weakening consumer demand and confidence, small businesses scaling back hiring plans, a weakening labor market, and the Federal Reserve raising interest rates to More than 5%. Looking at the past seven recessions, Shilling highlighted that they occurred, on average, 26 months after the Fed began raising interest rates. He said it has been about two years since the Fed raised interest rates for the first time this round, which is a sign that "the economy is about to enter a recession." "The potential for a recession is high," he added, noting there has only been one soft landing since World War II. Even so, Shilling predicts the economic collapse will take time. Businesses have held on to layoffs in recent years after facing labor shortages, while consumers have kept spending by dipping into pandemic savings and racking up record credit card debt, he said. It's worth pointing out that despite Shilling's longstanding warnings about U.S. stocks and the economy, neither has lived up to his pessimistic predictions and performed surprisingly well. But given his long track record and decades of experience, many investors are still willing to listen to him.
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