The Stock Market Crash Of 2024 | What You Must Know

the stock market is doomed and I'm selling everything this is the type of comment I'm seeing all over social media right now I get it everything's taken a sudden dive from stocks to crypto and I know a lot of you who watch my channel have just started investing so for you guys this is understandably pretty worrying so today I thought it was important to address your concerns explain what's causing all this Mayhem and finally give you my thoughts on how you can best navigate this storm I'm prioritizing getting this video out quickly so don't expect the editing to be as slick as usual it's more important for you to hear the information so you can use it to your advantage this is one video you should definitely not skip so why is the stock market plummeting to put this into perspective the S&P 500 dropped 3% which was the biggest one day drop in nearly 2 years the Dow dropped 2. 6% while the NASDAQ slipped 3. 4% this sounds pretty alarming and from my research there are four main reasons for this so let's go through them one by one so that we can see if we're du another historic market crash similar to the 2008 financial crisis or just a little bump along the road reason one of course is the fear of recession now if the economy went into a recession the stock market would most likely plummet this isn't always the case as there have been a few exceptions to this like in the 2020 recession as the S&P 500 returned 16 .

3% for that year however that isn't the norm this makes sense as during a recession less money is being spent by people like you and me companies then start far in staff leading to more people being unemployed which causes people to spend even less this results in companies also earning less and most of the time stock price is being impacted this is one vicious cycle and I hope you can see why this would be a pretty bad situation to be in so if we aren't in a recession yet why is the stock market going down well as the stock market is known as a leading indicator Whenever there is a hint of a recession happening it reacts to that news pretty negatively so you're probably thinking what was that hint well several data report showed that the US had only added 114,000 jobs in July below expectations of about 150,000 and the unemployment had risen to 4. 3% this is higher than any month since October 2021 look these numbers are far from a disaster the unemployment rate is still relatively low and the underperformance in hiring isn't terrible however it has triggered something known as the sarm rule this is a pretty cool little rule that activates when the average unemployment rate over 3 months goes up by at least 0. 5% compared to its lowest point over the past year the reason people take this seriously is because it's accurately predicted every us recession since the second world war in response Goldman Sachs raised its odds of a recession occurring in the next year from 15 to 25% interestingly the woman who came up with the rule Claudia s doesn't think the law is going to be right this time and to put your mind at ease there have been other rules like this before such as the bond yield curves that have turned out to be unreliable recently one reason why it might be a false alarm is that this time around unemployment isn't Rising because people are losing their dream jobs instead it's because more people are entering the workforce however as I mentioned before unemployment Rising is only one factor in the vicious cycle of a recession the other important one is the amount of money everyday people are spending unfortunately it looks like spending is slowing down too now it may sound odd but a good way to gauge this is by checking how companies like McDonald's and Walmart are doing and both have recently said their customers are cutting back on spending another company to watch is Wayfair I actually buy a lot of my furniture from them I'm actually sitting on a Wayfair chair right now they recently mentioned that customers are being very cautious we're spending down nearly 25% from 3 years ago now this all sounds pretty worrying however when it comes to the S roll this time around I'm taking it with a pinch of salt even Goldman Sachs seem to agree although theyve increased their projection on the risk of recession they still think it's pretty unlikely there's also a lot of time for the big dogs at the Federal Reserve to swoop in and protect the economy which leads me nicely on to reason two is interest rates right check out this graph the last few times that the FED cut interest rates from their Peak a recession followed closely behind and guess what's just happened you got it the US Federal Reserve hinted after its meeting at the end of July that interest rates would soon be cut now this graph also looks pretty concerning however it really doesn't show us the full picture to understand why this time is different from those past examples on the graph we need to look at why the Federal Reserve initially put interest rates up in 20202 the answer is simple the pandemic hit money printers were on full blast and Supply chains were suffering leading to high inflation levels the only way to bring prices back under control was to increase interest rates this was an unprecedented situation which I don't think we see again in our lifetimes certainly not in mine when they did this they set an inflation rate target to hit and said they would start cutting rates once they achieved it this strategy worked and inflation has come down pretty significantly from its peak of 99.