will the stock market keep crashing? What to watch

This article answers the practical question: will the stock market keep crashing by examining definitions, mid‑2020s context, historical precedents, drivers that could prolong declines, indicators ...

2025-11-23 16:00:00

By CryptoBridge Communicator

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Will the stock market keep crashing?

Short summary

will the stock market keep crashing is a common question after periods of sharp declines or heightened volatility. This article defines the terms used in market commentary, surveys mid‑2020s drivers (U.S. and global), reviews historical crashes and recovery patterns, and lays out indicators and scenarios to watch over horizons from weeks to years. It synthesizes public analysis (sources noted) and explains what signals would support continued decline versus stabilization and recovery. This is a market‑outlook discussion, not personalized investment advice.

Definitions and terminology

Crash, correction, bear market

Correction: an equity pullback of roughly 10% from a recent peak. Corrections are common and often short‑lived in historical context (Source: CNN Business).
Bear market: a decline of approximately 20% or more from peak values and typically associated with broader economic stress or earnings deterioration. Bear markets can be persistent and last months to years.
Crash: a sudden, large drop in prices over a short period (days to weeks) often driven by panicked selling or a shock event. A crash differs from a gradual cyclic drawdown or a valuation‑driven bear market because of speed and market dislocation.

Market breadth, retest, and other technical terms

Market breadth: the proportion of stocks participating in a move. Strong rallies with narrow breadth (few large caps driving returns) raise concentration risk; weak breadth on rebounds suggests fragility.
Retest of lows: after a drop, markets sometimes bounce then return to prior lows to test whether selling pressure remains. A successful retest that holds can signal stabilization.
Rally vs cyclical recovery: a rally is a price rise (sometimes short‑lived) while a cyclical recovery implies earnings, credit, and macro trends improving enough to sustain rising valuations.

Recent context (mid‑2020s snapshot)

This section summarizes major forces shaping equity volatility through the mid‑2020s, drawing on public market commentary.

Post‑pandemic recovery and AI rally

The post‑2022 recovery was driven heavily by large technology companies and firms tied to AI spending and data‑center capex. Strong gains concentrated in a handful of mega‑caps produced outsized market returns and compressed sector diversification (Source: The Motley Fool, Investopedia). Concentration in a few names raises systemic vulnerability: if those leaders underperform, overall indices can fall abruptly even when broader economy signals are mixed.

2024–2026 policy and geopolitical influences

Policy and geopolitical headlines have been important volatility drivers. Examples include tariff announcements, trade tensions, and fiscal policy swings. Large fiscal bills or stimulus narratives (sometimes discussed in market reports as “one big beautiful bill” or similar phrases) can lift growth expectations, while sudden tariff escalations or restrictive fiscal moves can reduce trade volumes and earnings projections (Source: U.S. Bank; The Motley Fool). Policy uncertainty tends to increase risk premia and short‑term market swings.

Monetary policy backdrop

Central bank action—especially from the U.S. Federal Reserve—remains central. Expectations about rate cuts, persistent higher‑for‑longer guidance, or stickier inflation change real yields and discount rates applied to future corporate earnings. When real yields rise, equity valuations, particularly for long‑duration growth stocks, often compress (Source: Investopedia; U.S. Bank). The sequencing of inflation, employment data, and Fed guidance has driven episodes of rapid repricing.

Historical precedents and lessons

Examining major past crashes helps frame probabilities without guaranteeing outcomes.

Dot‑com bubble (late 1990s–2002)

Valuation excess in internet and tech names collapsed after earnings failed to justify sky‑high multiples. Recovery was multi‑year and required sector rotation and rebuilding of corporate profits (Source: The Motley Fool).

Black Monday (1987)

A rapid single‑day market collapse highlighted liquidity and program‑trading risks. The recovery in 1987 was relatively quick in calendar terms, but the event exposed structural weaknesses in trading infrastructure (Source: CNN Business).

Global financial crisis (2008)

A systemic credit failure drove deep declines across asset classes, requiring policy intervention and long‑lasting economic effects. Recoveries required fiscal and monetary backstops and were uneven across sectors (Source: CNN Business).

2022 drawdown

A policy‑driven repricing related to rapid Fed tightening and rising yields led to a broad market decline. The episode emphasized how quickly rate expectations can unwind valuations, especially for growth‑oriented sectors (Source: The Motley Fool).

Typical timelines

Corrections (≈10%) are often resolved in weeks to a few months; bear markets (≈20%+) can take many months to more than a year to reach a bottom and sometimes several years to fully recover. Swift declines can be short‑lived, but recoveries depend on earnings, liquidity, and policy responses (Source: CNN Business).

Key drivers that could sustain a continued decline

Several measurable and qualitative drivers could keep markets under pressure for an extended period.

Valuation metrics and concentration risk

High aggregate valuation measures (e.g., CAPE, trailing P/E) combined with index concentration in a few mega‑caps raise downside risk. If valuations were stretched coming into a shock, re‑rating can accelerate a decline (Source: The Motley Fool).

Slowing AI capex or a technology re‑rating

Markets that priced substantial future growth into AI‑exposed stocks can be vulnerable if corporate AI spending slows or earnings reports disappoint. A technology re‑rating can drag broad indices when large tech firms dominate market caps (Source: Investopedia).

Rising real yields / tighter monetary policy

Increases in inflation‑adjusted Treasury yields raise discount rates for future earnings and reduce the present value of long‑duration equities. Continued Fed hawkishness or unexpected inflation pressures can keep equities depressed (Source: Investopedia).

Deteriorating macro fundamentals

A pronounced recession, sharply weaker corporate earnings, or sustained declines in consumer spending can justify prolonged bear markets. Credit‑market stress and widening spreads would amplify equity declines.

Policy shocks (tariffs, fiscal surprises, geopolitical events)

Manufactured policy changes—new tariffs, rapid fiscal tightening, or trade restrictions—can hamper multinational earnings and supply chains, prolonging or deepening declines (Source: U.S. Bank; The Motley Fool).

Indicators to watch (leading and confirmation indicators)

Monitoring a blend of macro, market, liquidity, and technical indicators can help assess whether a decline is likely to continue.

Economic indicators

Employment: Payroll growth and unemployment trends influence consumer demand and Fed policy expectations.
GDP growth: Weakening GDP signals potential earnings stress.
Consumer spending and retail sales: Major drivers of corporate revenues in many sectors.
Inflation trends: Headline and core CPI feed rate path forecasts.

Market and valuation indicators

CAPE ratio and aggregate trailing P/E provide valuation context.
Market breadth: The advance/decline line, number of stocks above moving averages, and new highs vs new lows. Narrow leadership warns of fragility.
Sector leadership shifts: Rotation from growth to value or defensives, and whether more sectors join a rally.
Sentiment gauges: Fear & Greed and investor flows help time sentiment extremes (Source: Bankrate; The Motley Fool).

Liquidity and fixed‑income signals

Treasury yields and yield curve shape: Inversion often signals recession risk and can precede equity weakness.
Credit spreads: Wider spreads point to stress in corporate financing conditions.
Real yields (inflation‑adjusted): Key input into equity discount rates (Source: Investopedia).

Technical and volatility indicators

VIX and realized volatility: Spikes in implied volatility signal elevated risk premia.
Retests of prior lows and volume on down days: Critical confirmations of selling pressure.
Historically correlated valuation indicators discussed in market commentary; these can act as contrarian inputs when extreme (Source: The Motley Fool).

Probable scenarios and triggers

Below are three broad, evidence‑based scenarios and the triggers that would make each more likely. Each scenario is not a prediction but a framework to interpret incoming data.

Scenario A — Continued decline / protracted bear market

Conditions and triggers:

Deep recession or sustained earnings contraction.
Policy shocks such as sharp tariff escalation or fiscal missteps.
Persistent rise in real yields with no visible path to easing.
Likely market behavior and timeline:
Widening market breadth to the downside, broad sector participation in losses, and falling corporate credit quality. Bottoming could take many months; recoveries may require coordinated policy responses (Source: The Motley Fool; CNN Business).

Scenario B — Shallow correction then recovery

Conditions and triggers:

Temporary policy shock or geopolitical headline that proves transitory.
Corporate earnings largely resilient, and Fed signals eventual accommodation.
Likely market path:
A sharp correction (≈10–20%) followed by a rebound led first by large caps then a broadening advance as confidence returns. Classic correction behavior: quick panic then consolidation and recovery (Source: U.S. Bank; Investopedia).

Scenario C — Stabilization then slow grind higher

Conditions and triggers:

Fed eases or signals clear path to lower rates as inflation cools.
Earnings recovery driven by resilient consumer demand or restocking cycles.
How markets resume gains:
Stabilization at a new consolidation range, gradual improvement in market breadth, and rotation into cyclical sectors. Longer‑term upside requires improving corporate profits and liquidity support (Source: U.S. Bank).

Sector and asset implications

How a sustained decline or recovery manifests across sectors and asset classes matters for portfolio construction and risk management.

Technology and AI‑exposed stocks

High‑growth and AI‑linked stocks are sensitive to changes in discount rates and earnings growth expectations. A slowdown in AI capex or a re‑rating of growth multiples can trigger outsized declines among these names (Source: Investopedia). Portfolios overweight in these areas can suffer large drawdowns in a concentrated market sell‑off.

Cyclicals, financials, and defensives

Cyclicals (industrial, materials, consumer discretionary) tend to underperform during recessions but rebound strongly in recoveries.
Financials are sensitive to credit cycles and net interest margin outlooks; in some rate environments they can outperform, but credit stress can hurt them.
Defensive sectors (consumer staples, utilities, healthcare) typically provide relative stability during declines.

Alternatives and diversification

Bonds, cash, commodities, and digital assets can act as diversifiers but each has distinct behaviors:

High‑quality government bonds historically act as a flight‑to‑safety when growth risks rise.
Cash preserves optionality.
Commodities can hedge inflation risks.
Digital assets have shown weak correlation at times, but they carry distinct technology and market‑structure risks; practitioners should favor secure custody and robust platform choices. If discussing crypto custody and wallets, consider Bitget Wallet and Bitget exchange for accessing markets and custody solutions while evaluating risk (no endorsement of performance).

Important note on tokenized and on‑chain assets

As of January 8, 2026, according to CryptoSlate, a Bank of Italy research paper warned that an Ethereum price collapse could impair the blockchain’s ability to settle transactions and freeze more than $800 billion in tokenized assets. The report highlighted risks including validator economics, the falling economic security budget (estimated at ~17 million ETH or about $71 billion as of September 2025), and the potential for assets on chain to become illiquid or compromised if validators exit. Crypto‑native settlement risks mean that tokenized versions of real‑world assets and stablecoins could face unusual settlement‑layer failure modes not present in traditional markets. That analysis underscores that digital asset exposures bring unique infrastructure and contagion risks that equity investors and intermediaries should monitor (Source: CryptoSlate; Bank of Italy research paper).

Practical investment and risk‑management approaches

This section outlines widely accepted risk‑management techniques from public investor guidance. It does not constitute personalized financial advice.

Avoiding market timing; focus on asset allocation

Dollar‑cost averaging: Investing a fixed amount at regular intervals reduces timing risk across market cycles.
Rebalancing: Periodic rebalancing forces disciplined buy lows / sell highs across risk allocations.
Long‑term plan adherence: Align investments to time horizon and risk tolerance rather than short‑term headlines (Source: The Motley Fool; AOL‑themed investor guidance).

Hedging and liquidity considerations

Use of hedges (options, inverse products) can protect downside but introduces costs and complexity; suitability depends on investor sophistication.
Maintain liquidity buffers (cash or cash‑equivalents) to fund expenses or exploit dislocations.
Define rules for partial profit‑taking or incrementally adding to positions rather than ad‑hoc trading during panics.

Behavioral cautions

Panic selling often locks in losses and can cause investors to miss rebounds. Historical studies show that missing only a few of the best market days harms long‑term returns (Source: Bankrate; AOL).
Avoid social media‑driven herd moves; stick to plan and verified data.

Practical product and custody note

If you trade or custody crypto or tokenized exposure, prefer platforms and wallets that emphasize security and continuity. Bitget provides trading services and Bitget Wallet for custody and on‑chain interactions; evaluate platform safeguards, custody policies, and contingency plans for settlement‑layer shocks when holding tokenized assets.

Limitations, uncertainty, and model risk

Forecasting limits

Short‑term market movements are highly unpredictable. Models produce probability distributions, not certainties. Even robust indicators can be invalidated by unforeseeable shocks.

Conflicting signals and changing policy

Rapid policy shifts, regulatory changes for tokenized assets, or novel infrastructure failures (e.g., settlement‑layer stress on public blockchains) can invalidate prior assumptions (Source: Investopedia; U.S. Bank; Bank of Italy paper). Market participants must update views as data arrives.

Notes and disclaimers

This article summarizes public market commentary, historical evidence, and research reports. It is informational and not personalized financial, legal, or tax advice. Investors should consult qualified advisors before making investment decisions. Discussion of trading platforms or wallets (e.g., Bitget exchange and Bitget Wallet) is informational; readers should evaluate platform terms, custody arrangements, and regulatory considerations independently.