A booming stock market doesn’t stop bears from sounding the alarm about a potential crash. Here’s why they’re worried.

• Baj strategists warn of a potential stock market decline as the economy cools.

• Indicators like the Sahm Rule and labor market weakness suggest a looming recession, the bears say.

• One strategist predicts that a recession could cause the stock market to drop 70% amid high valuations.

Bearish strategies are sounding the alarm about a potential stock market crash as the economy shows signs of cooling.

While the stock market doesn’t seem to care about those predictions, with the S&P 500 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 like the Sahm Rule have flashed recently, the labor market is seeing growth decelerate and any interest rate cuts from the Federal Reserve may not be enough to prevent a downturn, bearish forecasters say.

From a possible recession to a 70% drop in the stock market, here’s a roundup of the latest bearish predictions from Wall Street.

Mark Mobius: The economic warning sign is flashing for the first time in over 90 years

Billionaire investor Mark Mobius told CNBC this week that the decline in the M2 money supply since it peaked in 2022 represents the largest decline in the total money supply in nearly 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 may be less capital available for the discretionary spending that has driven the current economic expansion and the Wall Street market. Mobius said.

Mobius recommends investors hold 20% in cash to be ready to buy a potential drop in share prices and

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

Steve Hanke: It’s probably a recession in early 2025

Economist Steve Hanke warned this week that, in addition to the contraction in M2 Money Supply highlighted by Mobius, other signs suggest a recession will arrive in early 2025.

“We’re going to go into a recession either late this year or early next year in the United States, and that’s why we think inflation numbers will continue to come down,” Hanke predicted in a interview with wealth advisory firm Wealthion.

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

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“If you look at the micro data, it’s kind of consistent with this macro monetary picture that we just gave you of the slowdown, going into recession, inflation continuing to come down. That picture is, if you look at the micro, individual companies or sectors of the economy … the sectors look like a slowdown in the wind,” Hanke said.

Jon Wolfenbarger: A recession could send stocks crashing 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, according to Jon Wolfenbarger, founder of BullAndBearProfits.com.

In a recent note, Wolfenbarger pointed out that it’s not just an inverted yield curve and the flashing of the Sahm rule that suggests a recession is imminent.

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

This includes the year-over-year rate of change in employment growth falling to 0%. In the past, a negative reading of the year-over-year change in employment growth signaled a recession, according to Wolfenbarger.

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

Finally, a steady decline in manufacturing employment, based on the ISM index, suggests the unemployment rate may have more room to run, according to Wolfenbarger.

Given the stock market’s high valuations, these factors suggest to Wolfenbarger that the S&P 500 could eventually fall as much as 70% from current levels.

The Counterpoint: An Optimistic Approach to Balance the Condemned

While the job market shows signs of slowing, not everyone on Wall Street is worried about a potential recession or stock market crash.

Goldman Sachs called recession fears “overblown” in a recent note, pointing out that US consumers remain strong and corporate earnings growth continues to occur.

“Reports of concern about the US consumer are greatly exaggerated,” said Goldman’s Jan Hatzius. “Our quantitative measure of consumer sentiment around earnings calls improvement sequentially, sales growth at consumer-facing companies has slowed but remains healthy, and real income growth looks solidly positive across all income groups.”

And it doesn’t hurt that the Federal Reserve is shifting to a more accommodative stance, with imminent interest rate cuts likely.

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

“SPX $6,000 – New Q4 highs led by November and December,” Goldman Sachs said.

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