is the stock market going to crash in 2024

Is the stock market going to crash in 2024?

Lead summary

The question "is the stock market going to crash in 2024" asks whether major U.S. equity markets (S&P 500, Dow Jones Industrial Average, Nasdaq Composite) will suffer a sudden, severe decline during calendar year 2024. Forecasts combine macroeconomic indicators, market internals (breadth, volatility), liquidity measures and exogenous shocks. This article explains definitions and scope, summarizes market conditions entering 2024, reviews historical precedents, describes forecasting tools, lists potential triggers and notable 2024 events (with reporting dates), synthesizes expert probability assessments, lays out plausible scenarios, and recommends monitoring and risk-management steps for investors.

Note: this is an informational, wiki-style overview — not investment advice. Where relevant, Bitget is recommended as a secure trading platform and Bitget Wallet for Web3 custody.

Definitions and scope

• Stock market crash: a large, rapid, and often panic-driven decline in broadly held equity indices, typically a drop of 20% or more over a short time frame (days to weeks), but the phrase can be used loosely.
• Correction: a pullback of roughly 10%–20% from recent highs; corrections are common in bull markets.
• Bear market: a sustained decline of 20% or more from a recent high, usually accompanied by macroeconomic weakness and investor risk aversion.

Scope and timeframe

• Geographic / market scope: This article focuses on U.S. broad-market indices (S&P 500, Dow, Nasdaq) and the most likely spillovers to global equity markets. Many data series referenced are U.S.-centric but often correlate with global risk appetite.
• Timeframe: calendar year 2024. The analysis centers on whether a crash (as defined above) occurs during that period.
• Asset classes: primary focus is equities; where relevant, linkages to fixed income, liquidity measures (M2), and crypto markets are noted.

Background — market performance entering 2024

Entering 2024, U.S. equities were buoyed by a recovery that began in late 2022. Major indices registered sizable gains into 2024 driven by strong earnings in certain segments and a concentration of returns in megacap technology names. Investor sentiment ranged from optimism — driven by hopes for Fed easing and resilient corporate profits — to concern about rich valuations and concentration risk.

Key features entering 2024:

• Bull-market momentum: After the broad sell-off in 2022, markets rebounded strongly in 2023 and into 2024, with the S&P 500 and Nasdaq delivering robust year-on-year gains.
• Valuation concentration: Much of the index-level gains were concentrated in a handful of mega-cap names. Heavy weighting of a few stocks increased index-level returns while masking narrower market breadth.
• Liquidity normalization: Central-bank tightening since 2022 had reduced some liquidity cushions; markets were sensitive to rate paths and money-supply trends.

The combination of elevated valuations, narrow leadership, and sensitivity to policy moves created a backdrop in which downside risk — including the risk of a sharp crash — was a material concern for some analysts.

Historical context and precedent

Major historical crashes and severe declines offer context for probabilities and recovery patterns:

• 1929: A catastrophic crash followed by the Great Depression, with prolonged economic contraction and multi-year equity losses.
• 2000–2002 (dot-com bust): Overvalued tech sector collapse, with years of underperformance and a lengthy recovery for many growth names.
• 2008–2009 (Global Financial Crisis): A rapid fall tied to financial-sector stress, credit freezes, and deep recession, followed by policy-driven recovery.
• 2020 (COVID-19 sell-off): A swift, short-lived crash in February–March 2020 followed by unprecedented policy stimulus and a rapid rebound.
• 2022: A broad market bear market driven by rapid Fed tightening to combat inflation; the S&P 500 fell roughly 20%+ before stabilizing.

Typical recovery patterns and policy responses

• Crashes often coincide with economic contraction or severe liquidity stress, and central-bank or fiscal policy responses materially influence recovery speed.
• Markets have historically rebounded more quickly when policy support is aggressive and targeted (examples: 2009, 2020).
• But not every high-valuation environment ends in immediate crash; timing varies and many indicators are probabilistic rather than deterministic.

Forecasting tools and predictive indicators

Markets and economists use multiple indicators and models to infer crash or recession risk. None is perfect; combined signals carry more weight.

Leading Economic Index (LEI)

• What it is: The Conference Board’s LEI aggregates multiple forward-looking indicators (manufacturing orders, building permits, stock prices, yield spreads, consumer expectations, etc.).
• How to read it: Historically, prolonged declines in the LEI have often preceded U.S. recessions by several months. A sustained LEI decline raises recession and market risk.

Money supply (M2) trends

• What it is: M2 measures liquid money (currency, checking, savings, money-market funds). Rapid expansion can fuel asset price inflation; contraction can tighten financial conditions.
• Recent context: Since 2022, M2 contracted materially from the pandemic-era surge. Declining M2 has correlated with stress episodes historically, but causation is complex and impacted by banking flows and regulatory effects.

Yield curve and credit spreads

• Yield-curve inversion: When short-term yields exceed long-term yields (e.g., 2s/10s inversion), that has been a reliable recession indicator historically, usually with a lag of several quarters.
• Credit spreads: Wider spreads between corporate bonds (investment grade or high yield) and Treasuries signal rising default risk and lower risk appetite — both negative for equities.

Labor-market indicators and the Sahm Rule

• Sahm Rule: A simple recession signal that flags recession when the three-month average unemployment rate rises by 0.5 percentage point or more from its low during the prior 12 months.
• Relevance: A Sahm Rule trigger has historically coincided with the start of recessions. Small upticks in unemployment are worth watching; sustained increases raise probability of recession and equity stress.

Market internals, breadth, and volatility (VIX)

• Market breadth: Measures like the percentage of stocks above their 50- or 200-day moving average and the number of advancing vs declining issues show whether leaders are broad-based or narrow.
• VIX (implied volatility): Spikes in VIX often accompany corrections and worse; persistent elevation suggests higher short-term risk.
• Interpretation: Narrow leadership (few stocks driving index gains) plus deteriorating breadth increase the chance that a shock produces broad market losses.

Valuation measures

• Price-to-earnings (P/E) and cyclically adjusted P/E (CAPE/Shiller P/E) provide long-term valuation context. Extremely high readings historically coincide with lower subsequent 10-year returns and increased drawdown risk.
• Market-cap-to-GDP: Similar concept (Buffett Indicator) showing total equity market capitalization relative to GDP; elevated ratios suggest rich valuations.
• Hussman-style metrics: Some analysts use comprehensive valuation signals that, when extreme, forecast above-average downside risk.

Macro drivers and potential triggers for a 2024 crash

A crash in 2024 could be triggered or amplified by several macro and market drivers. Below are principal candidates.

Federal Reserve policy and interest rates

• Tightening legacies: The lag effect of 2022–2023 tightening could show up later in economic data and corporate earnings, forcing quick repricing.
• Rate-cut timing/magnitude: If the Fed cuts rates too late or too little in response to weakening activity, markets may price in deeper economic deterioration. Conversely, unexpectedly rapid easing after damage is done can limit downside.
• Result: Uncertainty about the timing and scale of Fed policy is a primary market sensitivity.

Recession risk and economic data

• Weakening indicators: Slowing jobs growth, contracting manufacturing PMIs, falling retail sales or sharp drops in consumer confidence could raise recession odds.
• Earnings: Earnings downgrades across multiple sectors increase the probability of a sustained equity drawdown.

Liquidity and money flows (carry trades, M2)

• Liquidity shocks: Rapid reversals in carry trades or large redemptions from mutual funds/ETFs can force selling, especially in less liquid segments.
• M2 contraction: Persisting declines in money supply can erode margin and speculative positions and tighten conditions for leveraged investors.

Geopolitical shocks and exogenous events

• Potential triggers: Major geopolitical escalations, large supply shocks (energy, commodities), or regulatory surprises can catalyze rapid market repricing.
• Note: This article avoids political detail but recognizes that sudden exogenous events can produce sharp equity drawdowns.

Sector-specific shocks (e.g., concentrated tech drawdowns)

• Concentration risk: If the market’s gains are driven by a small group of mega-cap tech stocks, a sharp sell-off in those names can produce meaningful index declines and spill into broader risk-off sentiment.
• Transmission: Margin calls, derivatives hedging and ETF redemptions can amplify such sector-specific shocks into a wider market event.

Notable 2024 market events and evidence

Below are selected 2024 developments widely covered in financial media (reporting dates noted):

• As of Aug 5, 2024, Bloomberg reported a sudden global selloff and rising recession fears after a large multi-market decline, noting that trillions of dollars of market value were erased in a rout. (source: Bloomberg, Aug 5, 2024)
• As of Aug 6, 2024, The New York Times covered market signals that stoked recession fears following the August rout and added context on economic indicators pointing to weakness. (source: The New York Times, Aug 6, 2024)
• As of Aug 8, 2024, Reuters reported that J.P. Morgan had raised its odds of a U.S. recession by year-end to 35%, reflecting deteriorating data and heightened risks. (source: Reuters, Aug 8, 2024)
• Multiple analysts and outlets in mid‑2024 flagged weakening LEI readings, ongoing M2 declines and Sahm‑Rule triggers as early warning signs — for example, commentary from Motley Fool in May–July 2024 discussing forecasting tools and three predictive metrics suggesting elevated downside risk. (sources: Motley Fool, May–July 2024)
• Notable single-stock moves: During 2024, large swings in mega-cap technology shares produced multiple single-day index moves; volatility in these names increased the chance a concentrated drawdown would ripple across indices (reported across major outlets throughout 2024).

Reporting context and caveats

• The items above are representative signals and high‑profile media coverage from 2024 that analysts cited as support for elevated downside scenarios. Each indicator is noisy; attribution to any single cause is rarely definitive.

Expert views and probability assessments

Analysts and institutions offered a range of assessments in 2024. Below is a balanced synopsis with reported dates where available.

• UBS downside scenario: UBS publicly outlined a downside scenario in which the S&P 500 could suffer a large drawdown (illustrative example often cited around 20%+ under specified risk combinations). (reported by Business Insider and other outlets in 2024)
• JPMorgan: As of Aug 8, 2024, Reuters reported JPMorgan raising U.S. recession odds to 35% for the remainder of the year — an example of elevated recession probability from a major bank.
• John Hussman and valuation bears: Some practitioners (e.g., John Hussman) emphasized extreme valuation readings and warned of large potential downside (multiple-decade lows for expected returns); these perspectives imply severe bear scenarios in stressed conditions.

Differences in methodology

• Scenario-based models (UBS-style) often combine macro shocks, valuation re-ratings and liquidity squeezes to produce single-year drawdown estimates.
• Econometric models (JPMorgan, other large banks) typically compute recession probabilities from a suite of indicators (yield curve, LEI, credit spreads, macro forecasts).
• Valuation-driven warnings rely on long-horizon historical regressions (CAPE, market cap/GDP) that are informative for expected long-term returns but weaker for short-term timing.

Uncertainty reminder: Professional forecasts vary substantially because models weight indicators differently. A high recession probability does not guarantee a crash in 2024; it indicates elevated risk compared to baseline.

Potential outcomes and scenarios for 2024

Below are plausible, non-exhaustive scenarios for 2024 with brief descriptions of triggers and likely market behavior.

1. Continued rally / risk-on

• Trigger: Clear Fed pivot with gradual, telegraphed rate cuts and stable economic data; strong earnings and continued liquidity improvements.
• Market behavior: Broad participation, narrowing volatility, further gains led by cyclical and growth sectors.

1. Mild correction (10% or less)

• Trigger: Short-term data misses, profit-taking, or temporary liquidity squeeze without systemic credit stress.
• Market behavior: Volatility spikes, VIX transiently higher, breadth weakens then recovers; no sustained recession signal.

1. Sizable bear market (~20%–35%)

• Trigger: Combination of weaker macro data (jobs, consumer spending), persistent M2 contraction, credit spread widening and disappointing corporate guidance.
• Market behavior: Falls across sectors, rising unemployment, heightened VIX and increased downgrades; policy response may come but with lag.

1. Severe crash (fast, >30% rapid drop)

• Trigger: A sudden liquidity event, major banking stress, or a large geopolitical shock that forces immediate de-risking.
• Market behavior: Panic selling, liquidity evaporates in some markets, central-bank emergency measures needed to restore order.

Probabilities: Assigning precise probabilities is inherently speculative and model-dependent; the important takeaway is that probability of downside was elevated in 2024 relative to a complacent baseline, but timing and magnitude remained highly uncertain.

Implications for investors and risk management

Neutral, practical responses (not investment advice):

• Diversification: Maintain allocations across asset classes and within equities (sectors, market-cap) to reduce idiosyncratic exposure.
• Time horizon: Long-term investors often benefit from staying invested and using market dips to rebalance or add gradually.
• Rebalancing: Systematic rebalancing (e.g., quarterly) can lock in gains and buy on weakness without timing the market.
• Bonds/cash/hedges: Increasing high-quality fixed-income or cash can reduce portfolio volatility; consider hedges for concentrated exposures.
• Avoid market timing: For most investors, attempting to time a crash is counterproductive; disciplined saving and diversified strategies typically outperform timing attempts.

For investors seeking defensive measures (higher risk tolerance required):

• Stop-loss rules: Predefined rules to reduce position sizes after specific drawdowns can limit losses but can also lock in bad outcomes if volatility triggers are common.
• Options strategies: Protective puts or collars can cap downside at the cost of premiums; requires expertise and costs matter.
• Hedged allocations: Consider allocations to strategies that profit in volatility or that have low correlation to equities.

Bitget note: For traders and investors using cryptocurrency or cross-asset strategies, Bitget offers spot and derivatives markets and Bitget Wallet for custody. Use reputable platforms, understand margin risks, and follow exchange-specific risk controls.

Limitations of forecasting and key caveats

• No indicator guarantees accurate short-term predictions. Many indicators (LEI, yield-curve, M2) are probabilistic and have false positives.
• Historical analogues can mislead: Every cycle has unique features (policy regimes, structural changes, technological shifts) that reduce simple pattern extrapolation.
• Market dislocation: Equity markets can remain disconnected from fundamentals for prolonged periods due to liquidity, speculative flows or policy support.
• Reporting lag and revisions: Macroeconomic series are revised and may change the signal after initial publication.

Practical takeaway: Use multiple indicators, maintain humility about timing, and align actions with risk tolerance and investment time horizon.

Monitoring checklist and data to watch for late‑2024

Track these high-priority items (frequency in parentheses):

• Monthly jobs reports (BLS) — payrolls, unemployment rate (monthly).
• CPI / PCE inflation prints (monthly): headline and core measures (monthly).
• Federal Reserve statements and FOMC decisions (as scheduled): dot plots, forward guidance (per FOMC cycle).
• Conference Board LEI releases (monthly): sustained declines are warning signs.
• M2 / money supply updates (monthly): trend direction matters.
• Yield curve (2s/10s, 3m/10y) and bank funding spreads (daily/weekly): watch for inversions and widening.
• Credit spreads (investment-grade and high-yield) and CDS indexes (daily/weekly).
• VIX and market breadth metrics (daily/weekly): persistent VIX elevation and falling breadth are negative.
• Major geopolitical or policy events (as they occur): sudden shocks can change probabilities quickly.

Suggested thresholds (guidance, not rules):

• Sahm Rule trigger (0.5% rise in 3-month unemployment average) — a clear recession signal.
• LEI: sustained multi-month declines — elevated recession risk.
• Yield-curve inversion reappearing or deepening — rising recession odds.
• Credit spreads widening materially from recent ranges (e.g., high yield +200–300bp over Treasuries) — increased stress.

Relationship to cryptocurrencies and cross‑market spillovers

• Crypto often amplifies risk sentiment: In periods of equity stress, crypto assets can experience larger percentage drawdowns due to higher volatility and liquidity differences.
• Different fundamentals: Crypto is more sensitive to speculative flows, on-chain activity and exchange-specific liquidity; however, strong risk-off in equities commonly coincides with weakness in crypto.
• Practical note: Traders who use cross-asset hedges should monitor correlations and funding-rate dynamics closely; Bitget's exchange and Bitget Wallet can be used to manage positions and custody securely.

See also

• Bear market
• Recession indicators (LEI, Sahm Rule)
• Volatility index (VIX)
• Federal Reserve monetary policy
• Market valuation metrics (CAPE, P/E, market-cap-to-GDP)

References (titles, source, reporting date)

• "Global Stock Market Crash Is Just the Start of Rising Recession Fears" — Bloomberg, reported Aug 5, 2024.
• "Stock Markets Signal Recession Fears. Here’s the Economic Outlook." — The New York Times, reported Aug 6, 2024.
• "J.P.Morgan raises odds of US recession by year end to 35%" — Reuters, reported Aug 8, 2024.
• "US market selloff stokes recession fears, trounces rate cut cheer" — Reuters, reported Sep 4, 2024.
• "Stock Market Crash 2024? 3 Predictive Metrics That Suggest a Sizable Downturn in Stocks Is Forthcoming" — Motley Fool, reported Jun 30, 2024.
• "Will the Stock Market Crash in 2024? It Doesn't Matter as Much as You Might Think." — Motley Fool, reported Jul 9, 2024.
• "Is a Stock Market Crash Coming in 2024? This Is How Long the Average Bull Market Lasts." — Motley Fool, reported Jul 16, 2024.
• "Are Stocks Going to Crash? This Forecasting Tool Hasn't Been Wrong in 65 Years" — Motley Fool, reported May 12, 2024.
• "The stock market could crash 23% this year if these 3 risks become reality, UBS says" — Business Insider, 2024 reporting.
• "A notorious market bear ... warns of 70% potential downside for S&P 500" — Business Insider (summary of Hussman views), 2024 reporting.

(Reporting dates listed above reflect the published reporting dates cited in contemporaneous coverage.)

External data sources to monitor (official agencies)

• Federal Reserve (policy statements, FOMC minutes)
• Bureau of Labor Statistics (jobs and unemployment reports)
• Bureau of Economic Analysis (GDP, corporate profits)
• The Conference Board (Leading Economic Index)
• CME Group FedWatch (rate-implied probabilities)

Further reading and tools: track market breadth dashboards, VIX term structure, credit-spread series and M2 time series from official sources.

Further exploration

If you want to track these indicators in one place, consider creating a watchlist and calendar for releases. For crypto-related hedging and custody, explore Bitget’s trading tools and Bitget Wallet for secure key management. Stay informed with reputable data sources and align actions with your investment horizon and risk tolerance.