Could S&P Crash More Than 40%?

The Federal Reserve, led by Chair Jerome Powell, is expected to keep interest rates steady in December due to persistent inflation risks, reminiscent of the 1970s inflation crisis that caused significant market declines. Factors like tariffs, mass deportations, and tax cuts—potential policies under a Trump presidency—could drive prices higher by limiting supply while increasing consumer spending power. If inflation persists, the Fed may raise rates aggressively, pushing short-term treasury rates above 6-7%, which could lead to a massive shift from stocks to safer assets like treasuries, echoing the market turmoil of 2022.
Additional risks include the U.S. federal debt burden, commercial real estate struggles, and rising consumer loan defaults, potentially triggering a broader financial crisis. Market sentiment could be further destabilized if the U.S. faces debt default risks. There’s hope that policymakers might adjust inflationary measures, but if delayed, the economy risks sliding into a severe recession with sharp market declines.