Wall Street Bears Warn of Potential Stock Market Plunge as Economy Cools
As the S&P 500 hovers near record highs, bearish strategists are sounding alarms about a potential stock market plunge amid signs of a cooling economy. Despite the market’s apparent indifference to these warnings, several indicators suggest a looming recession, according to Wall Street’s most pessimistic forecasters.
Reliable recession indicators, such as the Sahm Rule, have recently flashed warning signs. Additionally, the job market is experiencing decelerating growth, and some analysts argue that potential interest rate cuts from the Federal Reserve may not be sufficient to prevent an economic downturn.
Billionaire investor Mark Mobius highlighted concerns about the decline in M2 money supply since its 2022 peak, representing the largest drawdown in nearly a century. Mobius advised investors to maintain a 20% cash position to capitalize on potential stock price declines.
Economist Steve Hanke predicts a recession in early 2025, citing micro-level indicators such as rising unemployment rates, slowing retail sales, and sluggish activity in the housing and manufacturing sectors.
Jon Wolfenbarger, founder of BullAndBearProfits.com, warns of a possible 70% stock market decline if a severe recession hits during a period of elevated valuations. Wolfenbarger points to under-the-radar signals in the job market, including declines in employment growth rates and average weekly hours worked.
However, not all analysts share this bearish outlook. Goldman Sachs recently called recession fears “overblown,” emphasizing the strength of US consumers and continued corporate earnings growth. The bank also suggested that post-election clarity could drive the S&P 500 to new highs of 6,000.
As conflicting forecasts emerge, investors face uncertainty about the market’s future direction. While some prepare for a potential downturn, others remain optimistic about continued economic growth and market gains.
