The possibility of a recession looming by early next year has experts warning of a potential 30% drop in stocks. BCA strategist Roukaya Ibrahim and Wall Street veteran Gary Shilling both foresee a downturn driven by continued unemployment and challenges from China’s struggling economy.
Ibrahim highlighted two key factors indicating a recession by the end of this year or early 2025. She pointed out that the US stock market is currently overvalued, with PE estimates expected to revert to pre-pandemic levels. This vulnerability could lead to a significant correction in the S&P 500, potentially falling to around 3600.
Despite a recent jobs report showing some positive signs, Ibrahim cautioned that underlying data suggests a weakening economy. Lower job openings, hires, and quit rates hint at a shift towards a recession, raising concerns about future unemployment rates.
China’s economic struggles also pose a significant threat, as Ibrahim noted the lack of substantial stimulus from Chinese policymakers. This, coupled with challenges in European countries, could hinder any global manufacturing recovery.
Gary Shilling echoed Ibrahim’s sentiments, predicting a 30% stock market crash by the end of the year. With a track record of foreseeing the mid-2000s mortgage bubble, Shilling believes a recession could unravel speculative bets that have accumulated in recent years.
As experts sound the alarm on a potential economic downturn, investors are advised to tread carefully and brace for potential market volatility in the coming months.
