Caixin Online, August 26 (Editor Huang Junzhi) With signs of an economic slowdown, the bulls on Wall Street are starting to be "restless", and have issued warnings of a possible collapse of the U.S. stock market. Despite the ongoing "celebration", the S&P 500 index is less than 1% away from its record high, and the Fed Chairman signaled a major dovish shift last Friday.

However, the bears believe that reliable economic recession indicators, such as the "Sahm Rule", have recently triggered an alarm, with slowing growth in the job market, and any Fed interest rate cuts may not be enough to prevent an economic downturn. Some even predict that the U.S. stock market may plummet by 70%.

Mark Mobius: Haven't seen this kind of warning signal in nearly a century!

Mark Mobius, known as the "father of emerging markets", recently stated that during the epidemic, M2 money supply surged, but for most of the past few years, M2 money supply has been contracting. Currently, the M2 total stock is 3% lower than its peak value a few years ago. He warned that this is the largest decrease in the total money supply in nearly a century.

"This decline is of historical significance, as M2 has never experienced such a decline in over 90 years. The main concern is that if M2 money supply has been declining since April 2022 and has not kept pace with economic growth, the capital available for discretionary spending may decrease, and discretionary spending has been driving the current economic expansion and the bull market on Wall Street," he said.

Mobius advises investors to hold 20% in cash and to "look for companies with little or no debt, moderate profit growth, and high return on investment, and then re-enter the market".

Steve Hanke: Economic recession may occur in early 2025

Steve Hanke, a renowned American economist and professor of applied economics at Johns Hopkins University, known as the "Currency Doctor," warned last week that in addition to the contraction of M2 money supply emphasized by Mappes, there are other signs indicating that an economic recession will occur in early 2025.

He cited some microeconomic indicators, including a steady increase in the unemployment rate to 4.3%, the highest level since the pandemic, continued slowdown in retail sales, and sluggish housing and manufacturing activity.

"If you look at the micro data, it is consistent with the macro monetary picture I just gave you, that the economy is slowing down, entering a recession, and inflation continues to decline," he said.

He predicts that "the United States will enter a recession by the end of this year or early next year, which is why we believe inflation data will continue to decline."

Jon Wolfenbarger: Economic recession could cause a 70% stock market crash!

Jon Wolfenbarger, a former investment banker at Merrill Lynch and JPMorgan, warns that if the US economy experiences a painful recession when valuations are high, the US stock market could plummet by 70%.

In a recent report, Wolfenbarger emphasizes that not only the inverted yield curve and the Sam Rule's "red light flashing" indicate an imminent economic recession. There are also other unnoticed signals indicating that the labor market is cooling, which is consistent with an economic recession.

He added that this includes a year-on-year decline in the employment growth rate to 0%. Wolfenbarger states that in the past, a negative year-on-year change in employment growth signaled an economic recession.

He also said that another concern in the labor market is the continued decline in average weekly working hours, currently about 34.2 hours. Any further decline in this indicator will trigger a signal that has not been seen since 2008 and 2020. 2008 and 2020 were the two years when the US economy suffered painful recessions.

Finally, according to the ISM index, manufacturing employment is steadily declining, indicating that the unemployment rate may have greater room to rise. He emphasized that considering the rise in stock market valuations, these factors suggest that the S&P 500 index may eventually fall by up to 70% from its current level.