The stock market could crash 23% this year if these three risks materialize, says UBS

A trader works during the Fed rate announcement on the New York Stock Exchange (NYSE) in New York, U.S., March 20, 2019.Reuters/Brendan McDermid

  • According to UBS, the stock market is in a downside scenario that could lead to a crash of more than 20% for the S&P 500.

  • The bank highlighted three major risks that investors should be aware of even as record highs are reached.

  • A potential recession, rising inflation and geopolitical unrest all loom for investors.

Even if the stock market rises to record highs, According to a recent note from UBS, there are looming risks that could lead to a steep sell-off later this year.

The bank emphasized a downside scenario for the stock market that would cause the price to rise S&P500 a 23% crash to 3,700, which is just above the depth reached during the October 2022 bear market low.

According to David Lefkowitz, chief investment officer for UBS equities, there are three risks that would lead to such a bearish scenario later this year.

The first is that the US will slide into a “full recession” in the next six to 12 months, the note said.

While Many economists have come to the idea that a recession is no longer possible this year, Lefkowitz said the delayed effects of the Federal Reserve’s rate hikes, combined with shrinking household cash buffers, could trigger an economic downturn.

The Fed has raised rates 11 times between 2022 and 2023, and it could take up to 12 months for the impact of those increases to ripple through the economy. That timeline would point to a weakening in the second half of 2024.

Another risk for the stock market is that inflation remains high, which would be a rude awakening for the economy and consumers as…

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