Stock market experts are voicing rising concerns regarding an upcoming stock market crash and recognize various factors influencing these concerns. These factors include high inflation, new Federal Reserve policies and increasing geopolitical tensions. In the past one and a half years, there has been a very bullish stock market driven by the AI hype, but all of the factors have left investors concerned about the future.
A bullish stock market is when the market is doing well whereas a bearish stock market is when the market is doing bad or has low gains.
For many, high inflation has meant cutting back on unnecessary spending, which has, in turn, made it harder for businesses to make profits. Without as much revenue, businesses are struggling, which could foreshadow a stock market collapse. “Everything from groceries to gas is getting more expensive and it is making it harder for people to save or invest, “ stated senior Reetham Gubba.
Recently, the Federal Open Market Committee has implemented rate cuts by reducing the interest rate, as they are taking a cautious approach towards stabilizing the economy. “A change in the interest rates can influence many things like loans and the growth of businesses,” stated Gubba. This will help businesses with loans however it will increase the effect of inflation decreasing business spending.
The 2024 presidential election has also led to much uncertainty for investors regarding the stock market, especially with the shift in power. “I am nervous about what changes a new president like Trump might bring, and how his policies will affect the economy,” stated junior Vrayas Pila. With a businessman as president, we can expect some changes to business regulations that could help the economy and increase business by decreasing regulation.
The President-elect is not the only one who may be influencing the stock market, though. On social media, billionaires and corporate giants such as Elon Musk exert significant influence on the stock market. Musk is known for his ability to sway stock prices through posts on X (formally Twitter). “This is not good for us normal traders, as one negative comment from Musk can and will cause huge point drops in specific sectors, this impacts normal traders more than day traders,” said Pila.
Elon Musk has also become further involved in politics with the potential creation of a Department of Government Efficiency. This can increase his influence on the stock market.
Stocks influenced by these factors like social media and the upcoming new president have been growing exponentially since the election, but there is growing concern with overvaluation. Firms in sectors such as technology and green energy have seen their stock prices soar even when their financial statements show limited earnings. “When companies don’t back up their stock growth with real profits, it feels like a bubble waiting to burst,” said Pila. Accordion to experts, such growth shouldn’t be relying on projections and market hype but on sustainable business performance. If these companies were to sell all their stocks it would cause a major national crisis, and something similar to this was previously seen in the Wall Street crash of 1929 where many people investing in stocks led to overvalued stocks.
The stock market is also strongly affected by international influences such as global conflicts. The Ukraine-Russia war for example is affecting global energy markets which are very important to many businesses. Additionally with the Middle Eastern conflicts oil prices have risen as there are concerns regarding whether oil production end up being affected if the conflict escalates.
These international issues can hurt the global supply chain, which disrupts many international businesses and industries and causes their stocks to fall drastically. The Suez Canal incident in 2021 is a prime example of how a block in the supply chain can affect the economy and business with it blocking nine-billion dollars worth of supplies per day for the six-day period it was blocked.
Despite strong market gains in 2024, experts and student investors alike should be cautious about overlooking these potential risks. Due to causes ranging from inflation and geopolitical tensions to the transition of power to a new administration, the market is quite volatile, which urges a high degree of caution when trading.
