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"Brace For October Stock Market
Crash As All Hell Is Breaking Loose"
by Epic Economist
"Carnage is still underway in financial markets, and investors are rushing for the exits and repositioning while they still can because another painful stock market crash is on the horizon. In recent weeks, a massive sell-off accelerated after corporate earnings projections dropped below expectations, but things have gotten significantly more turbulent last Wednesday when the Federal Reserve delivered the third consecutive 75 basis points hike and signaled a steeper path of interest rate increases over the coming months. Against this backdrop, the S&P 500 and Nasdaq 100 suffered heavy losses, and the Dow Jones entered the bear market territory, falling 20% from its peak. In a few days, we might see a lot more chaos sweeping through Wall Street. Experts and strategists are telling us that those who believe the market will still bounce back are simply delusional – and they are about to get a reality check. Some of the brightest minds in the financial world are saying we should all brace for a major shock – one that will not only affect stocks, but businesses, households, crypto markets, and the entire global economy.
In its September FOMC meeting, the Federal Reserve explicitly said that Americans should get ready for a deep housing correction, higher unemployment, and an economic recession as it continues to raise rates to control inflation. At this point, the entire global economy is set to face what could be the worst growth shock since the financial crisis. But despite the clear warnings, some market players are still delusional about how the stock market will perform in the rest of the year and in 2023.
In August alone, the S&P 500 plunged by 11%, and the Dow fell 9%. Despite the losses, estimates for how much profit S&P 500 companies will earn next year seem completely out of touch with our economic reality. Wall Street's rosy projections for corporate profits do not consider the fact that even the nation’s biggest companies are struggling with slower business activity and declining consumer spending. Inflation is still wreaking havoc on the economy, and the worsening profit outlook means that the blindly optimistics are about to get burned.
Soon enough, when investors realize that there’s a flood of companies in financial distress, we’re going to see a devastating chain reaction. Nouriel Roubini, who foresaw the 2008 financial catastrophe, recently came forward to alert that deteriorating economic conditions all across the globe will make the S&P 500 experience a significant correction by the end of 2022, bringing a lot of pain for market players, indebted companies and U.S. households. Roubini, the chairman and CEO of Roubini Macro Associates, says that “the S&P 500 can fall by at least 30% in any recession,”. But the coming crash is probably going to be far steeper as we witness a “truly hard landing,” he says.
The truth is that no one really knows how much higher rates will go – or for how long the Fed will continue to hike them to be able cool inflation. But as the sênior correspondent at Insider, Linette Lopez, noted: “Whether that results in a short downturn or a recession, we know that whatever is coming won't be positive for corporate earnings. Since 1960, earnings have dropped during recessions by an average of 31%. And the longer the economic slump — and by extension, the profit slump — lasts, the worse it will be for stocks.”
Well... In other words, all of the images we’ve seen of a screaming-red stock market and sweaty traders doing the sign of the cross reflect the beginning of the end. Wall Street has been flying so high it forgot that stocks don't always go up. And, as Lopez outlined, the higher you fly, the farther you fall. The law of gravity never fails to catch us up."