Welcome to the Twilight Zone of the economy — a place where bubbles float on hot air pumped by fiscal fantasy and monetary madness. As we pass the halfway point of 2025, Torsten Slok at Apollo dropped a market bombshell: the first real 40%-50% crash in 16 years could be underway. The bubble that began back in March 2009 is finally gasping for air.
Slok points to something subtle but dangerous: durable goods prices are rising again after a 2.5-year nap. For context, durable goods are your big-ticket “do-I-really-need-this?” purchases, unlike housing and food, which are “buy-it-or-cry” expenses. Combine that with economist Harry Dent warning consumer price index inflation could climb back above 3% — and we’ve got a cocktail that’s less “old-fashioned” and more “Molotov.”
And while President Donald Trump’s tariffs haven’t torched the economy just yet, Slok believes we’re cooking the grits low and slow — and they will hit the fan late this year. Meanwhile, Wall Street keeps expecting Jerome Powell to ride in with rate cuts by September. But if the economy rolls over before then, brace yourself — because by the time we get confirmation, it may be too late.
Watch those 10-year Treasury yields. If they jump above 4.5%, history says equity investors reach for the Tums. On July 28, we were already flirting at 4.43%.
How did we get into this economic episode of “Nailed It: Policy Edition?”
David Kelly, chief global strategist at J.P. Morgan, explains that America’s trade deficit isn’t really due to “unfair” tariffs abroad. It’s fueled by two unsexy culprits: our budget deficit is enormous, and the U.S. dollar is too darn strong. That combo makes our exports pricey and our imports cheap — so Americans buy too much foreign stuff, and foreigners say “no thanks” to ours. Want a trade balance? Fix the budget and stop juicing the dollar.
But do we ever learn?
Let’s rewind to 1929. Then-President Herbert Hoover didn’t tweet tariffs into being — he passed them through Congress. The Smoot-Hawley Tariff cratered global trade and deepened the Great Depression. U.S. stock prices fell 89%, real estate in New York sank 67%, and it took 25 years for the Dow to recover. That’s assuming no one panicked and pulled out early, which never happens.
Apply today’s numbers and $2 million in 1929 assets might become $500,000 overnight. And remember: in 1925, the average life expectancy was just 59, per the Centers for Disease Control and Prevention. Many didn’t live long enough to see the rebound.
Which begs the question: Is your portfolio built to survive a crash, not just chase the next boom? How many legs does your financial stool have? Stocks and bonds alone won’t cut it in a world where real estate and equities can collapse simultaneously.
Maybe it’s time for a second opinion. Regret, after all, is the one asset class that never corrects.
John Grace is a registered representative with LPL Financial. His On the Money column runs monthly in The Wave. The opinions expressed here are for general information only and are not intended to provide specific advice or recommendations for any individual.
