The possibility of a stock market crash in 2024 is a topic of discussion among analysts, experts, and even Reddit users. Redditors are predicting an economic collapse in the U.S., fueled by factors such as inflation, debt, and job market instability. Interest in pessimistic views of the market and the economy is rising, as indicated by increased Google searches for 'stock market crash' and 'economic crash'. Membership on the r/economiccollapse subreddit has also spiked by 80% since the end of 2021 [4388f18f].
A group of users on the subreddit r/economiccollapse are preparing for a Soviet Union-type fall of the US economy. The subreddit's membership has grown 80% from the end of 2021 to the end of 2023. The middle class and ALICEs (asset limited, income constrained, employed) are struggling financially. The housing market is facing problems with sky-high mortgage rates and an increasing number of houses worth less than their mortgages. The stock market's strength is partially attributed to AI, which could lead to a crash. Job growth has slowed, and interest-rate cuts are being delayed. Inflation concerns are debated, with some arguing a soft landing is still possible [b2121cae].
Despite the prevailing pessimism, the U.S. economy has managed to avoid a predicted recession over the past two years. However, concerns are not unfounded as the U.S. economy is facing a potential downturn due to slower-than-expected growth and higher-than-anticipated inflation. Some top economists and analysts have warned of a potential stock market crash in 2024, citing factors such as a U.S. recession, persistently high inflation, and geopolitical tensions [3d42a10c] [cf477835] [d4d083db].
Robert Kiyosaki, author of the bestselling book 'Rich Dad Poor Dad,' advises people to own their businesses, use debt to buy cash-flowing assets, save real gold and silver, and invest in cryptocurrencies. He believes these strategies can help individuals navigate and potentially benefit from an economic collapse [4388f18f].
Investment strategist Ed Yardeni has warned about the potential for a stock market 'melt-up' driven by Federal Reserve rate cuts. This perspective suggests that the market could experience a rapid and unsustainable rise before a potential crash [4388f18f].
The US economy is failing with high interest rates and a lack of innovation. The stock market is detached from reality and there are concerns about its sustainability. The surge in stock prices is primarily driven by seven tech giants: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla. The market is considered overvalued with a Shiller ratio of 35x. Corporate profits are stagnating and consumer demand is declining. The US government is facing a looming debt spiral with debt exceeding GDP. Avoiding default will be difficult and could lead to deflation, inflation, conflict, or innovation. The article urges caution and highlights the potential decline in the standard of living [e662fa71].
The US is facing warning signs of a financial crisis, including financial bubbles, latent capital losses, opaque markets, and high public deficits. The resurgence of inflation and high interest rates pose a risk of a financial crash. In March 2023, regional banks went bankrupt due to long-term investments and rising rates. Private finance, particularly office real estate, is at risk, with $18 billion of securitized loans needing repayment. The tension is high as only 35% of loans have been repaid at maturity as scheduled in 2024. The US economy is facing storm clouds brought on by persistent inflation and high interest rates [a8be8bc8].
Macroeconomist Henrik Zeberg warns that the Federal Reserve's intervention in the US economy might not be sufficient to prevent the largest economic crash since 1929. Zeberg criticizes the Fed's focus on inflation as a lagging indicator in the business cycle. He predicts that the Fed's eventual infusion of liquidity will temporarily send the market into a blow-off top before a significant crash sets in during the fourth quarter of 2024. Zeberg bases his projection on the United States non-manufacturing new orders indices, which reveal a pattern that precedes significant market downturns. The data shows a similar emergence of a pre-crash pattern, with dropping new order indices indicating a slowdown in economic activity. Zeberg also notes that the Relative Strength Index (RSI) is hovering around a critical level, suggesting weakening market momentum. The economist maintains that the US economy is primed for a recession in the second half of 2024 [f7a36ffc] [2f753ae9].
Three predictive metrics suggest a potential stock market crash in 2024. The first metric is the decline in U.S. M2 money supply, which has historically correlated with periods of double-digit unemployment and economic depressions. The second metric is the longest yield-curve inversion of the modern era, which has preceded every U.S. recession since World War II. The third metric is the high valuation of stocks, as indicated by the Shiller price-to-earnings (P/E) ratio, which is currently more than double its historical average. While these metrics do not guarantee a stock market crash, they serve as cautionary indicators for investors [1586fdbf].
Wall Street has experienced a roaring bull market since early 2023, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite up 18%, 43%, and 71% respectively. However, three predictive indicators suggest a potential stock market crash in 2024. First, the US M2 money supply has experienced a historic decline, which has historically correlated with periods of double-digit unemployment and economic depressions. Second, the Treasury yield curve has been inverted since July 2022, which has preceded every US recession since World War II. Finally, the Shiller price-to-earnings (P/E) ratio for the S&P 500 is at 35.70, more than double the average over the past 153 years, and previous instances of the ratio exceeding 30 have resulted in significant declines in stock prices. While these indicators do not guarantee a crash, they suggest caution and the need for a broader perspective on the stock market [4a31b849] [3dfbdc6d] [f7a36ffc].