This stock is expected to skyrocket if the stock market crashes this summer

You may not have heard of Harry Dent Jr. He is an American author, economist and investment firm founder who correctly predicted the Japanese economic downturn in 1989. He also predicted the collapse of the internet bubble.

Dent now believes the stock market is going to collapse in the next three months, with a good chance that it will happen before the end of July. And he doesn’t think it’s going to be a minor slowdown. He recently said in an interview with the financial publication ThinkAdvisor that it “will be the biggest crash of our life.”

There is no way to know if Dent’s pessimistic outlook is warranted at this point. However, even though he’s right, I don’t think all the stock will plunge. There is at least one stock that is expected to skyrocket if the stock market crashes this summer.

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The most likely culprit in an accident

Dent believes the housing price bubble will burst and be the root cause of a short-term stock market crash. I do not find this argument very convincing. Interest rates remain close to their historic lows. The stock of homes for sale is still well below demand. Mortgage capital provider Freddie mac expects the housing market to remain strong throughout this year.

If a stock market crash is underway in the next few months, as Dent predicts, I think there is a much more likely culprit – the rise of coronavirus variants. This shouldn’t be surprising given that the coronavirus caused the most recent stock market crash just over a year ago.

We are already seeing an increase in COVID-19 cases around the world, largely due to the spread of the delta variant first identified in India. Just last week, several countries in Europe issued new travel restrictions due to concerns about this variant of the coronavirus.

One of the main drivers of the tremendous rally in stocks after the sell-off in early 2020 was the expectation that the economic effect of the pandemic would be short-lived. Many investors are counting on a widespread economic reopening. It is possible that new variants will dash those hopes and set the stage for another market collapse.

The biggest beneficiary

My opinion is that vaccine stocks would likely take off if the coronavirus variants caused a stock market crash in the next few months. After all, vaccines would be the best chance to beat the variants. I also believe that BioNTech (NASDAQ: BNTX) would be the biggest winner of the group.

Why BioNTech? On the one hand, it is by far the smallest of the companies that currently have vaccines on the market. Catalysts typically generate larger swings in stocks with smaller market caps than those with larger market caps.

I think it is important that BioNTech and its partner, Pfizer (NYSE: PFE), are already working on strategies to deal with the rise of the delta variant. Both companies believe that a third dose of their COVID-19 vaccine could offer more protection against this strain of coronavirus. They also plan to begin clinical trials in August of a modified version of the vaccine that specifically targets the delta variant.

There is also the question of evaluation. BioNTech is currently the cheapest of the major vaccine stocks, based on multiples of term benefits. Biotech stocks are trading at just 6.3 times expected earnings. I wouldn’t expect this low valuation to last very long if fears about the coronavirus variants increase so much that there is a huge market downturn.

A breach in the apocalypse

Now a critical warning: I don’t think Dent’s prediction of an impending stock market crash will come true. It’s not that there’s no way he’s right; my point of view is just that it is unlikely to be.

I have already explained why I disagree with his view that the housing market bubble will precipitate a crash. And while I think the increase in coronavirus variants would be the most likely cause of a short-term market plunge, I still don’t expect that to happen.

It is important to understand that the COVID-19 vaccines currently available are still very effective in preventing serious illness, even against the delta variant. The main problem, in my opinion, with the increase in COVID-19 cases is that too few people have been fully vaccinated. However, enough people have been fully vaccinated that I did not expect a return from the blockages we saw last year.

Also, with all due respect to Harry Dent, he was a little wrong in the past. As an example, he published a book titled The Great Depression Ahead in early 2009. In this book, he predicted a major economic depression that could last a decade or more. History has not treated this prediction kindly.