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Published: January 15, 2024 at 2:24 PM ET
Donald Trump’s wish for a U.S. stock market crash this year is unlikely to come true.
I’m referring to the former US president’s comments last week that he hopes the market will crash in 2024. Because even if he is elected in November and takes office a year later, he does not want to become another Herbert Hoover. Hoover was president when the stock market crashed in 1929.
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Donald Trump’s wish for a U.S. stock market crash this year is unlikely to come true.
I’m referring to the former US president’s comments last week that he hopes the market will crash in 2024. Because even if he is elected in November and takes office a year later, he does not want to become another Herbert Hoover. Hoover was president when the stock market crashed in 1929.
The stock market has fallen in two of the past four presidential election years, so it’s no wonder the same thing will happen in 2024. In 2008, during the global financial crisis, the S&P 500 SPX fell 38.5% in the year. In 2020, the S&P 500 index fell 34% in just over a month as the coronavirus disease (COVID-19) pandemic shut down the economy.
Of course, a crash can occur at any time, so we cannot deny the possibility that it will occur this year as well. Nevertheless, the probability of it occurring this year is significantly below average. That’s according to the latest State Street U.S. Foam Forecast, which is based on research into the crash conducted by Harvard Business School banking and finance professor Robin Greenwood.
In that study, Greenwood and his co-authors found that it was possible to pinpoint when a crash became more likely. Greenwood said in an interview that “overall” the market as a whole, as well as individual market sectors, are “unlikely to crash” at this point.
Greenwood’s model is based on a number of factors, including business performance over the past two years, volatility, stock turnover, IPO activity, and the upward price path over the following two years. For example, he and his fellow researchers found that if an industry beats the market by more than 150 percent of his time over a two-year period, he has an 80 percent chance of that industry crashing. They define this as a decline of at least 40%. Over the next two years of his life. As you can see from the attached graph, State Street reports low collision probabilities in all sectors. In both cases, these are significantly lower than the average predicted crash probabilities over the past five years.
These probabilities do not mean that 2024 will be a great year for the stock market. A new bear market could begin this year without meeting the researchers’ definition of a crash.
Nevertheless, the takeaway from State Street’s U.S. bubble forecast is that there are bigger things to worry about this year than a possible crash.
Mark Hulbert is a regular MarketWatch contributor. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. You can contact him at: mark@hulbertrateds.com
more: President Trump expects market crash in 2024 under Biden administration: “I don’t want to be Herbert Hoover”
Also read: Iowa caucuses could be make-or-break for Donald Trump
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