A booming stock market doesn’t stop bears from sounding the alarm about a possible crash. This is what they are concerned about.

• Bearish strategists warn of a possible stock market decline as the economy cools.

• Indicators like the Sahm Rule and labor market weakness point to an impending recession, the bears say.

• One strategist predicts that a recession could cause a 70% stock market decline as valuations soar.

Bearish strategists are sounding the alarm about a possible stock market crash the economy is showing signs of cooling down.

While the stock market doesn’t seem to care about these predictions S&P500 less than 1% away from hitting record highs, there’s still plenty to worry about, according to Wall Street’s biggest bears.

Reliable recession indicators such as the Sahm rule has been flashed Lately, the labor market has seen growth slowing, as well as possible interest rate cuts by the Federal Reserve may not be enough to prevent a recession, say gloomy forecasters.

From a possible recession to a 70% stock market decline, here’s a look at Wall Street’s latest bearish predictions.

Mark Mobius: Economic warning sign flashes for the first time in more than 90 years

Billionaire investor Mark Mobius told CNBC this week that the decline in the M2 money supply since its peak in 2022 is a the largest decline in the total money supply in almost a century.

“The main concern is that if the M2 money supply has declined since April 2022 and has not kept pace with economic growth, there could be less capital available for the discretionary spending that the current economic expansion and Wall Street bull market have controlled. Mobius said.

Mobius recommends investors hold 20% in cash so they are ready to buy a potential drop in stock prices

“Look for companies with little or no debt, moderate earnings growth and high returns on capital, and prepare to re-enter the market,” Mobius said.

Steve Hanke: A recession is likely in early 2025

Economist Steve Hanke warned this week that in addition to the contraction in the M2 money supply highlighted by Mobius, other signs point to a recession in early 2025.

“We will enter a recession in the United States late this year or early next year, which is why we think inflation rates will continue to decline,” Hanke predicted in a interview with the wealth advisory firm Wealthion.

These micro-level indicators include the steady increase in the unemployment rate to 4.3%, the highest level since the pandemic, a continued slowdown in retail sales and sluggish housing and manufacturing activity.

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“If you look at the micro data, it’s more or less consistent with the macro monetary picture I just gave you, of a slowdown, a recession and a sustained decline in inflation. “If you look at micro statistics, individual companies or sectors of the economy are the economy… the sectors look like a slowdown is on the horizon,” Hanke said.

Jon Wolfenbarger: A recession can cause stocks to plummet 70%

Investors could experience a 70% drop in the stock market if a painful recession hits the economy at a time when valuations are high, said Jon Wolfenbarger, founder of BullAndBearProfits.com.

In a recent note, Wolfenbarger emphasized that it’s not just about an inverted yield curve flashing of the Sahm line That suggests a recession is imminent.

There are other under-the-radar signals that indicate the labor market is cooling in a way consistent with economic downturns, Wolfenbarger said.

This also includes the year-on-year rate of change in employment growth, which falls to 0%. In the past, a negative year-over-year change in employment growth has signaled a recession, according to Wolfenbarger.

Another concern in the labor market is the continued decline in the average number of hours worked per week, which is around 34.2. Any further decline in this indicator would send a signal not seen since 2008 and 2020, two years in which a painful recession hit the US economy.

Finally, a steady decline in manufacturing employment, based on the ISM Index, suggests the unemployment rate could have more headroom, Wolfenbarger said.

Given high stock market valuations, Wolfenbarger says these factors indicate the S&P 500 could ultimately fall as much as 70% from current levels.

The counterpoint: a bullish approach to balance the doomsayers

Although the job market is showing signs of slowing, not everyone on Wall Street is worried about a possible recession or stock market crash.

Goldman Sachs called recession fears “exaggerated” in a recent note, This underlines that US consumers remain strong and corporate profits continue to grow.

“Reports of concern about the American consumer have been greatly exaggerated,” said Goldman’s Jan Hatzius. ‘Our quantitative measure of consumer sentiment in terms of earnings figures improved Sequentially, sales growth at consumer-facing companies has slowed and remains healthy, and real income growth appears solidly positive across all income groups.”

And it doesn’t hurt that the Federal Reserve is shifting to a more dovish stance, with upcoming rate cuts looking likely.

The bank also said that trillions of dollars of cash on the sidelines could flood the stock market and push the S&P 500 up 7% to 6,000 once investors know the winner of November’s presidential election.

“SPX $6K – new highs in the fourth quarter, led by November and December,” said Goldman Sachs.

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