Tuesday, October 29, marks the 95th anniversary of the most famous stock market crash in history, Black Tuesday, which occurred in 1929. This most massive U.S. stock market crash was the beginning of the Great Depression, the worst economic crisis in U.S. history.
In recent years, experts have again started talking about recession and the possible collapse of the U.S. economy.
«Black October» of 1929
The stock market crash began a little earlier, on October 24, 1929, when stocks suddenly began to fall in value, triggering panic among investors. During the day, the Dow Jones index sagged 11% from 305.85 to 272.32 points. On Friday, October 25, President Herbert Hoover said there had been a “technical glitch” and assured investors that the brief decline was no danger to the U.S. economy. However, disaster was on the way. Over Monday and Tuesday, October 28-29, the Dow Jones index collapsed 24.5%. The stock market bubble burst and the entire U.S. economy began to collapse. This is how the Great Depression began, when banks that gave loans to buy stocks to investors, companies that could no longer get loans from banks went bankrupt, millions of people lost their jobs and strikes began in the streets.
The stock market crash was preceded by a stock market frenzy, when many Americans invested in stocks, often with loans rather than real money. Thus, the stock market grew, its capitalization reached almost 86% of the US GDP in 1929. The bubble burst after the Fed raised the rate to 6%. As a result, the US economy was able to return to pre-crisis indicators only in 1954.
Economists warn of a possible recession in the US in 2025
The US economy has been growing steadily since the end of the last recession, which lasted from February to April 2020. It was one of the deepest, as the COVID-19 pandemic and quarantine measures led to a sharp decline in economic activity and rising unemployment. However, the US authorities managed to overcome it rather quickly thanks to financial injections and monetary stimulus measures.
Starting from 2022, experts are again expecting a recession in the US every year. However, with the beginning of the Fed's rate cut cycle, the forecasts are becoming less fatal. Thus, Goldman Sachs analysts believe that the risk of recession is limited because, in general, the data on unemployment, inflation in the country look good and the U.S. economy is not serious imbalances. At the same time, Goldman Sachs analysts raised the estimated probability of recession in the U.S. in 2025 from 15% to 25%.
According to Ruqayyah Ibrahim, strategist at BCA, a recession in the US economy in early 2025 could lead to a 30% drop in stocks. According to the expert, the US stock market is overvalued and its value will fall to pre-pandemic levels.
Wall Street veteran Gary Shilling holds a similar opinion. Economists believe that persistent unemployment and unfavorable conditions related to China's weakening economy will be the reasons for the economic slowdown next year.
Anirban Bazu, from Associated Builders and Contractors, believes that if last year a recession seemed inevitable to most experts, then in this and future years many have abandoned the negative forecast. However, Basu insists on the inevitability of a recession in the United States, while, according to the economist, it may be very weak.
Legendary investor Jim Rogers remains one of the few “predictors of the Apocalypse”. The longtime business partner of George Soros expects an “extremely serious” recession in the U.S., which will cause investors to flee into protective assets: oil, gold and silver. It is worth noting that Rogers admits that he does not know when exactly this recession will happen, but he seeks to prepare in advance for a possible collapse of the U.S. stock market.
In general, most experts agree that if a recession in the U.S. occurs in 2025, it will be shallow and will not lead to devastating consequences for the economy and the stock market. A second “Black Tuesday” is not expected in the foreseeable future.
