Even as the stock market rallies, the US economy is slowing down. Credit card delinquencies are rising, auto loan delinquencies are rising, US GDP is slowing down, the unemployment rate is rising, and all signs are pointing to a recession in 2024. A 2024 recession could cause a 2024 stock market collapse. And it wouldn’t just be the stock market in trouble. The commercial real estate crisis has caused recession fears to skyrocket as the banking collapse gets worse. The commercial real estate crisis is twice as big as the housing crisis was in 2008, and this means a 2024 recession could be twice as big as the Great Financial Crisis. An economic collapse in 2024 leading to a stock market crash in 2024 is looking more and more likely with each new piece of economy news we get. The latest stock market news shows a 2024 collapse, perhaps caused by a bank run in 2024 or a banking crash, could cause a financial collapse in 2024 and a stock market collapse in 2024. The upcoming market crash will be bad news for stocks.
America is entering a horrific financial crisis, one that is on track to be twice as bad as the 2008 great financial crisis. And at the rate we’re going, we’re not going to make it past 2025. For those of you who are new to this channel, my name is Stock Curry. I’m a former Merrill Lynch and Morgan Stanley investment banker, and I have over 25 years of trading experience. In this video, I’m going to go over why I think the stock market is starting to top out, we’re going to discuss when the market might actually start to fall, and I’m going to go over some economic news. If you’ve been following the stock market, you’ve probably been unaware of all of the economic news pointing to just how bad the economy is getting.
But it shouldn’t be surprising to you that the stock market is continuing to rise despite the falling economy. This is pretty common and happens quite frequently. I traded through the 2021 dot-com bubble and watched as stocks rallied to incredible highs, only to fall with the S&P 500 falling 60% in 2001 and 2002, and the Nasdaq falling 80% during those two years. I also traded through the 2008 great financial crisis, as I saw stocks once again rally, even in the face of worsening economic data, only to fall significantly in 2008, with the S&P 500 falling nearly 50% that year. And once again, I’m seeing stocks rally, even as the overall economy slows down and continues to get worse.
And now Roaring Kitty is back once again as the Nasdaq jumps to a record close and the Dow adds more than 100 points ahead of Wednesday’s Consumer Inflation Report. He last made a post on June 18th in 2021, right after the meme stocks started to crash. And on Sunday he made his first post once again. That’s right, roaring Kitty is back. Roaring Kitty was the face behind the GME and AMC stock rallies back in early 2021, and with his return, GME has rallied once again. And AMC has joined the bandwagon as well. Of course, I do find it ironic that Roaring Kitty came on the scene in early 2021 at the height of the stock market rally, and then disappeared right after those meme stocks crashed and started falling back down to reality. A lot of people might remember 2021. It wiped out a lot of retail consumers, as retail investors lost between 60% to 90% of their portfolio values by holding on to those meme stocks.
The market has rallied for the sixth straight day. The stock market rang up its sixth consecutive gain today, extending its early 1987 rally to new heights. Wait a second, 1987!? That’s right. In early 1987, the stock market was rallying, even as the overall economy was getting worse. Even as fears of stagflation were just starting to get better, as inflation was high, and interest rates were rising, the stock market was continuing to rise. But we all know what happened late in 1987. The stock market had its worst crash in history.
As the economy remains strong, the Federal Reserve tends to continue to raise interest rates. But then later on, the Federal Reserve will lower interest rates once it realizes that the economy is slowing down and it needs to lower interest rates in order to stimulate the economy and avoid a major recession. And that’s usually when the stock market tops out and starts going back down. Also, you can see here in 2001 how the Federal Reserve cut interest rates right around the exact same time that the stock market topped out and started to go back down. You can see it happened again in 2007, where the Federal Reserve cut interest rates and the stock market topped out and started to go back down around the same amount of time.
Now one thing that is interesting about this chart is sometimes the stock market will top out slightly before the Fed actually starts cutting interest rates, and sometimes the stock market will top out a little bit after the Fed starts cutting interest rates. But either way, all of these things happen around the same time. The Fed starts to cut interest rates, the stock market tops out and starts to fall, and shortly thereafter we officially enter a recession. The reason for that is because, for whatever reason, the Federal Reserve as well as the stock market, tends to ignore worsening economic signs. They tend to believe that these worsening economic signs are either temporary or not that important, and they continue to ignore them until it just gets to be too late. And once it’s too late, everybody scrambles. Stocks start to sell off. The Federal Reserve starts to cut interest rates. But like I said, by that point it’s too late and we always enter a recession.
Now the question is when will the stock market wake up to this reality? And when will the Federal Reserve wake up to this reality? When will the Fed start cutting interest rates, and when will the stock market start to fall? Well, for now we have a problem, and that’s high inflation. Powell says inflation has been higher than thought, and he expects to hold rates steady in order to give inflation time to come down. Fed Chair Jerome Powell reiterated Tuesday that it was likely going to keep interest rates elevated for an extended period. So at least for the time being, the Federal Reserve is not expected to cut interest rates, and the stock market is not expected to fall. We will most likely get one of those insane, massive meme style rallies here over the next 3 to 4 months, just like we saw in early 2021, before eventually getting a top in the stock market. Now if the Federal Reserve does cut interest rates sometime between September and December, as they are expected to, we can expect the stock market to top out and fall sometime between September to December. A lot of people think that the Democrats are trying to hold off any sort of fall in the stock market or any sort of cut in interest rates until after the election. I think there might be some truth behind that. We’ll just have to wait and see. But if that is true, then after the election, it’s over.
On Tuesday, wholesale prices rose 0.5% in April, which was once again more than expected. Core PPI rose 0.5%, compared with only a 0.2% Dow Jones estimate. Inflation continues to come in higher than expected, and that is going to force the Federal Reserve to delay interest rates much longer than people were hoping for. To make matters worse, even though the core CPI has been flattening out, the headline CPI over the past six months has started to rise. You can see that clearer here on this chart, how every single month for the past six months, the month over month headline CPI has risen. And with inflation not only flattening out but actually starting to rise once again, this has led some people to wonder if the Federal Reserve might actually have to raise interest rates in order to get inflation down. Of course, if they do, that’s going to make the economy worse. And we’re going to talk about what that might cause here in a minute.
Now the Consumer Price Index, or CPI, is being released on Wednesday before the open. We’ll get more details on where the inflation rate stands and what the Federal Reserve might actually end up doing at their next meeting here on Wednesday. Now the problem with these videos is people very often watch these weeks after they’re produced, sometimes months after they’re produced. Sometimes people even watch these videos years after they’re produced. And by that point the data is just old. So what I really want to recommend is that you go sign up for my free weekly newsletter. In that free weekly newsletter I give you an update of what is happening this week in the markets. That way you’re not getting old information, you’re getting fresh, new, updated information. And the predictions in that newsletter are correct about 80% to 90% of the time. So make sure you go sign up for that free weekly newsletter. You can get it here.
So what is the problem with rising inflation, or at the very least, inflation no longer going down? Well, the problem is the economy is also slowing down. And when inflation is high, and the economy is slowing down, and the unemployment rate is rising, that is called stagflation. And Bank of America’s strategist Hartnett warns that the stock market rally is exposed to stagflation risk. Fed rate cut bets have driven the highest stock market optimism since November of 2021, but investors expect weaker global growth and lower corporate earnings. And if the economy slows down and corporate earnings go down, then the stock market rally cannot sustain itself. Stocks will suffer if evidence of stagflation materializes.
According to Bank of America’s global poll, a majority of fund managers see the Federal Reserve cutting rates in the second half of 2024, and that has significantly lifted investor sentiment to the highest since November of 2021. Within that mix, however, the outlook for economic growth and corporate profits has deteriorated for the first time this year. And this is really interesting because November 2021 was just one month away from the top of the stock market, before the economy really did slow down in 2022, and corporate earnings did slow down in 2022, and the stock market entered a bear market in 2022. And once again we have the highest optimism since November of 2021, just one month before the stock market topped out. And we have beliefs that the economy is slowing down, and we have beliefs that corporate earnings are slowing down as well.
Now if we compare the S&P 500 index to the Citi US Economic Index, you can see how normally these two move in tandem. In the two circles off to the left here, you can see that as the Citi US Economic Index goes down, the stock market generally goes down also. And as the Citi US Economic Index goes up, the stock market generally goes up also. But over the past year we’ve had the opposite happen. We’ve seen the Citi US Economic Index go down, while the stock market has gone up. Normally we don’t see this big of a divergence, and it can lead to major problems for the stock market once the stock market corrects.
So we know that the expectations are for the economy to slow down and for earnings to go down, but are we actually seeing that? Well, this might surprise you. Even though the unemployment rate remains historically low, for over a year now we have seen the unemployment rate rise. This is due to hundreds of companies laying off workers. And now Walmart is the latest company to lay off hundreds of corporate workers. And things continue to get worse as Red lobster is now closing at least 99 locations, and it is expected to file for bankruptcy within the week. The unemployment rate is rising, layoffs are rising, and companies are filing for bankruptcy. These are not the signs of a healthy economy. These are the signs of an economy that is about to enter a recession.
We know the economy is slowing down, but what about corporate earnings? During the Q1 earnings season, numerous companies have missed earnings expectations, and Home Depot is the latest, which missed on its revenue. Home Depot on Tuesday posted quarterly revenue below Wall Street’s expectations as shoppers postponed bigger discretionary projects like bath and kitchen remodels because of higher interest rates. The retailer said it anticipates comparable sales, which take out the impact of store openings and closures, to decline by about 1%. In the fiscal first quarter, consumers made fewer visits to Home Depot stores and websites, and tended to spend less when they did.
The fact is, starting here in Q1, consumers have started to spend less money, and that is hurting corporate profits. As consumers spend less and less money, corporate profits go down. In turn, companies are forced to do layoffs in order to try to keep those profits up. Those layoffs cause even more people to be in financial trouble, and that causes consumer spending to go down even more. And eventually this all balloons into a recession. Keep in mind that consumer spending makes up 60% of the US economy. So if the US consumer is in trouble, the economy is in trouble.
Citigroup CEO Jane Fraser says low income consumers have turned far more cautious with spending. Inflation for goods and services has made life harder for many Americans. So if people are getting laid off, and the unemployment rate is rising, and people are cutting back on spending, how is it that consumer spending has remained so strong? Well, to put it simply, consumers have been spending a lot of debt. The total debt balance is now at a record high, and so far, consumers have done a pretty good job of keeping up with their credit card payments. But now things are starting to fall apart and America is entering a horrific financial crisis.
Credit card delinquencies are on the rise as Gen-Z cardholders are now maxed out on their credit card debt. Over the last year, roughly 8.9% of credit card balances have transitioned into delinquency. What we have seen in past recessions is that the credit card delinquencies and the auto loan delinquencies are usually the first to go. Those get followed up about one year later by people missing their mortgage payments and going into foreclosure. This is what led to the Great Financial Crisis in 2008. We actually saw credit card delinquencies start to rise in 2006. We didn’t actually see housing delinquencies start until 2007. And we didn’t see those foreclosures hit until 2008. Given that same timeline currently, we are not going to make it past 2025.
Americans overdue bills are mounting up and more people are missing payments. As people’s financial situations get worse and worse, they look for ways to try to fix their financial situation. And one of the ways people will do that is by getting rid of their very high paying car loans. A lot of car loans these days are well over $1,000 a month, and people just can’t afford them. One way people will try to get rid of those car loans is by doing something called a voluntary repossession. A voluntary repossession is when somebody voluntarily gives their car back to the bank in order to avoid just having a tow truck come and repossess it. By doing so, they’re able to avoid that very high monthly payments. And if we look at the Google search term trends over the past 90 days, voluntary repossession was almost completely unheard of up until about a month ago. And then the number of search terms for voluntary repo absolutely skyrocketed. It is clear that people are in trouble and they’re trying to give their car backs in order to save their finances.
And it’s not just auto loans that people are struggling to pay. Many Americans struggle to make timely payments. Last quarter, delinquency rates were on the rise for all debt types. The rising delinquency rates are most pronounced for credit cards and auto loans. During the first quarter, approximately 8.9% of credit card balances transitioned into overdue status by at least 30 days, up from the 8.5% in the fourth quarter. Among auto loans, 7.9% flowed into delinquency status last quarter, up from 7.7% previously. Credit card and auto loans that transitioned into serious delinquency, which is defined as more than 90 days overdue, rose across all product types and age groups. It’s not just one income bracket or one age group that is suffering here. All Americans are suffering.
Figuring out why Americans are missing payments is now key. It could be because people have kept consuming at high levels, despite running out of excess savings, or because layoffs and an unstable labor market have disrupted their income, or both. Now I have my beliefs why delinquencies are rising, but let me know in the comments below why you think delinquencies have started to rise. Why do you think credit card delinquencies and auto loan delinquencies have started to rise so much in the first quarter of this year?
Unfortunately for consumers, things aren’t getting better. They’re getting worse. On Tuesday, the Education Department announced the highest federal student loan interest rate in more than a decade. Higher interest rates also affect credit card payments, as most credit cards are on a variable interest rate fee. The average credit card interest rate is now more than 20%. Absolutely insane. There’s no way we can continue with this. At some point, it’s all going to collapse, even as it’s already started to. The only question now is how long can the banks and the federal government delay an eventual collapse before everything falls apart? My personal belief is they might be able to delay it until after the election. But sometime around October or November, I think it’s all going to come crumbling down. And either way, there is no possible way that we are going to make it past 2025. Let me know in the comments below how long you think the economy is going to survive before everything falls apart.
By the way, it’s not just consumers that are in trouble. The banks are in trouble too. You may have heard of something called a commercial real estate crisis. Essentially, what this is, is very similar to 2008, how housing prices started to come down, and then people started to go into foreclosure. And then banks held a lot of houses that were now worth far less than what the mortgages were, and they took massive write offs. This led to massive losses for the banks, and over a thousand banks collapsed between 2008 and 2010. And unfortunately, the commercial real estate crisis is very similar. As the prices of commercial real estate start to come down, and banks have mortgages that are far higher than the value of the commercial real estate properties as they go into foreclosure, this is going to cause significant losses on the banks balance sheets, and thousands of banks are expected to go out of business over the next 2 to 3 years.
Now so far, this has been delayed. Banks have simply not foreclosed on these properties. They have decided to simply let the property sit with no payments being made on them the mortgages and serious delinquency, but they just haven’t foreclosed. And the reason is, right now, these properties are what are called unrealized losses on the banks balance sheet. Which means the bank realizes that they have these losses, but they haven’t officially made these losses real because they haven’t foreclosed on the properties. If the banks foreclose on these properties, then those unrealized losses become realized losses, and the bank balance sheets are going to get destroyed, and the banks are going to start collapsing. So they’re delaying the collapse of the banks by simply not foreclosing on these properties. It’s just a game they’re playing. It’s actually known as wait and pray. They’re waiting to foreclose and just praying that things get better.
Of course, we know things aren’t getting better. They’re getting worse. How much worse? Well, it’s way worse than you could have ever imagined. Fort Worth’s tallest building sold for just $12.3 million at auction in a stunning price drop. Burnett Plaza, the tallest building in Fort Worth, Texas, has been purchased via foreclosure auction for just $12.3 million. Just three years ago, it was sold for more than $137 million. That is a 90% drop in the value of this building. A 90% drop in the value of commercial real estate. Let’s compare that to what happened to the residential real estate housing sector in 2008.
How much did housing prices drop in 2008? Well, it depends upon what data set you’re looking at. But according to the National Association of Realtors, the median existing home price in the US fell by 12.4% in the fourth quarter of 2008 compared to the same quarter of 2007. According to the S&P Case-Shiller Home Price Index, home prices fell by 18.2% in November 2008 compared to November 2007. And according to the Nationwide Building Society, house prices fell by 15.9% in 2008. So somewhere between 12% and 18%. That’s right. In 2008, home prices fell between 12% and 18%, and it caused the Great Financial Crisis. It caused over 1,000 banks to go bankrupt. It was the worst recession since the Great Depression in 1929. And now commercial real estate is not down by 12% to 18%. Commercial real estate is down by 90%. Oh yeah, and the size of the commercial real estate lending industry, well guess what, banks mortgages on commercial real estate are twice as big as the housing mortgages were in 2008, meaning that the next financial crisis which we are now entering is very likely going to be twice as bad as 2008.