As the economy shows signs of cooling down, most of Wall Street's leaders are starting to "stir up" and issuing warnings that the US stock market may collapse. Despite the ongoing frenzy in the US stock market, the S&P 500 index is less than 1% away from its record high, and the Federal Reserve Chairman also issued a significant dovish signal last Friday.
But big bears believe that reliable indicators of economic recession, such as the "Sahm Rule," have recently triggered an alarm that job market growth is slowing down, and any interest rate cuts by the Federal Reserve may not be enough to stop the economic downturn. Some even predict that the US stock market may plummet by 70% directly.
Mark Mobius: I haven't seen this kind of warning signal in nearly a century!
Mark Mobius, a legendary American investor known as the "godfather of emerging markets," recently stated that during the pandemic, the M2 money supply surged, but for most of the past few years, the M2 money supply has been shrinking, and the total M2 stock is currently 3% lower than its peak a few years ago. He warned that this is the largest decline in the total money supply in nearly a century.
This decline is of historical significance because M2 has never experienced such a decline in over 90 years. The main concern is that if M2 money supply continues to decline since April 2022 and fails to keep up with economic growth, the capital available for discretionary spending may decrease, which is driving the current economic expansion and Wall Street bull market, "he said.
Maipu Si suggests that investors hold 20% cash and "look for companies with little or no debt, moderate profit growth, and high return on capital before returning to the market.
Steve Hanke: Economic recession may occur in early 2025
Steve Hanke, a renowned American economist and professor of applied economics at Johns Hopkins University, known as the "money doctor," warned last week that in addition to the M2 money supply contraction emphasized by Max Planck, there are other signs indicating that an economic recession will come in early 2025.
He listed some micro indicators, including a steady increase in unemployment rate to 4.3%, the highest level since the pandemic, a continued slowdown in retail sales, and sluggish housing market and manufacturing activity.
If you look at the micro data, it is consistent with the macro monetary picture I just gave you, which is that the economy is slowing down, entering a recession, and inflation continues to decline, "he said.
He predicted that "the United States will enter a recession by the end of this year or early next year, which is why we believe inflation data will continue to decline
Jon Wolfenbarger: Economic recession could lead to a 70% drop in the stock market!
Jon Wolfenbarger, a former investment banker at Merrill Lynch and JPMorgan, has warned that if the economy experiences a painful recession at a high valuation, the US stock market could plummet by 70%.
In a recent report, Wolfenbarger emphasized that it is not just the inverted yield curve and the "red light flashing" of Sam's Law that indicate an imminent economic recession. There are other unnoticed signals indicating that the job market is cooling down, which is consistent with an economic recession.
He added that this includes a year-on-year decrease in employment growth rate to 0%. Wolfenbarger stated that in the past, a negative year-on-year change in employment growth indicated an economic recession.
He also mentioned that another concern in the job market is the continuous decline in the average weekly working hours, currently around 34.2 hours. Any further decline in this indicator will trigger signals that have not been seen since 2008 and 2020. 2008 and 2020 were two years when the US economy suffered a painful recession.
Finally, according to the ISM index, manufacturing employment has steadily declined, indicating that there may be greater room for the unemployment rate to rise. He emphasized that considering the rise in stock market valuations, these factors indicate that the S&P 500 index may ultimately fall by up to 70% from its current level.