The Crash Of 2025: One Chart That Will Flash A Final Warning

Forbes

24-03-2025

Before the current conflagration, I appeared on David Linn's financial podcast and was asked what I expected from the new presidential administration. I said the only certainty was increased volatility, which meant a high possibility of either great outcomes or the opposite.
While the markets are signaling bad news, it is difficult to predict the outcome in isolation because we are all far from the machinations that will drive it. I'm now a major bear, but the market doesn't listen to me – I need to listen to the market. Only a fool thinks they are never wrong. Success in the market comes from the flexibility to adapt and pivot with changing circumstances. Beyond mere malleability, it requires tools that highlight shifts in market dynamics.
Let me give you an example: gold. Gold moves before we understand why, serving as a strong indicator that something ominous is on the horizon. Bitcoin behaves similarly but in a different way. Gold signals that bad strategic developments are unfolding behind the scenes, while bitcoin reflects acute crises bubbling to the surface. Whether the issue is chronic or acute, these assets react before the news breaks – by the time the headlines arrive, the market has already adjusted. These are examples of leading indicators.
Right now, we need leading economic indicators.
Here is an example from a recent article:
Defense stocks: U.S. decling, European rising
Credit: ADVFN
U.S. defense stocks fall, and suddenly, European defense stocks rise. Who knew? It takes an idealist to believe that the new U.S. stance on global defense was a surprise to insiders around the time of the election results. It could be a coincidence, but…
Setting that aside, are there more such signals?
Personally, I take a stoic view. While Marcus Aurelius wasn't trading the Nasdaq, he would have told you, 'Change what you can; what you can't change, accept.' So instead, I'll listen to the market and see if it can help me avoid the worst of whatever is coming.
The key question is: Will the market crash, or will it hold at a correction level and bounce?
Let's look for a leading indicator. A crash and ensuing recession or depression will hurt some businesses more than others. Economic downturns and conflict will especially impact one sector: luxury. The post-COVID era has fueled unprecedented demand for $40,000 handbags, multimillion-dollar watches, and seven-figure hypercars. I must admit to owning a few that I love, but the point remains – this froth is the first to disappear if the global economy's foundation crumbles. Luxury brand companies will deflate like a soufflé.
If they don't, it's strong evidence that the 3D chess players have gotten it right and that things are going to be great – absolutely tremendous, believe me, no one will have seen anything like it.
So here is the chart you need to watch: LVMH, a colossus of luxury:
Luxury goods manufacturer LMVH: the chart to watch
Credit: ADVFN
It's already 20% down, just a few percentage points from what is considered a crash for an index.
However, this is what I will be watching:
The levels to look for in the LMVH chart
Credit: ADVFN
Simply put, if LVMH breaches these levels, the market is strongly indicating we are headed into a global recession, and a crash is underway. Savvy investors in luxury will be the first to bolt for the exits, making LVMH one of the first buffaloes to stampede off the cliff. If it holds, then the slump may not materialize.
This is my 'canary in the coal mine.'
I do have a couple of bullish considerations to keep in mind, even in the face of a potential downturn. Central banks will do their best to prevent a collapse. The Fed has already halted tightening and is fully capable of restarting QE. While not a panacea, this could provide a buffer against a market rout.
Finally, I see a sentiment emerging in the investor community that reminds me of crypto-bros when bitcoin crashes – a wave of denial and bargaining. This is a bearish signal, as it suggests a large, naïve cohort of investors with herd instincts, a volatile group often associated with major slumps.
The U.S. tariff denouement approaches, and whatever unfolds, one thing is for sure: volatility will be elevated. If you're holding, you need to decide now how you plan to navigate the next few months. It's better to be wrong than unprepared.
For me, it's cash, precious metals, agriculture, and steel. Yes, I am that bearish.