When taken as a whole, it's been another great year for the stock marketplace. Through Wednesday, Dec. 1, the criterion South&P 500 (SNPINDEX:^GSPC) was up 20% on a year-to-date basis. Considering that the widely followed index has averaged an eleven% full render, including dividends, over the past twoscore years, this is a solid performance.

Even so, the past week has been topsy-turvy for the stock market, with volatility retuning in a big fashion. We, as investors, may not like to think about stock market crashes and double-digit percentage corrections, just they're the price of admission to have part in ane of the world's greatest wealth creators.

Correct now, there are no shortage of catalysts that could send the Southward&P 500 over the border for its first crash or correction since the pandemic began. Here are ix reasons the stock market could crash in the next 3 months.

A visibly concerned person looking at a rapidly rising then plunging stock chart on a tablet.

Image source: Getty Images.

1. Omicron/variant spread

Let'southward start with the obvious: the coronavirus and its growing number of variants.

This year, the S&P 500 has enjoyed more five dozen tape-loftier closes. The expectation has been that increasing U.Southward. and global vaccination rates would let business concern to go dorsum to normal. But with each new variant of COVID-19, the potential arises for additional lockdowns, restrictions, supply chain concerns, and a possible decrease in consumer or corporate spending.

For what information technology's worth, the delta variant's emergence in May led to a short-term market hiccup that was fairly chop-chop put in the rearview mirror. The aforementioned could exist true for the omicron variant, only we but don't know plenty nearly it at the moment for Wall Street and investors to be confident buyers of stocks.

A family shopping in a grocery store, with their young child reaching for a bell pepper.

Image source: Getty Images.

ii. Historically high inflation

Some level of aggrandizement (i.east., the rising price of goods and services) is expected in a growing economic system. However, the 6.2% increase in the Consumer Price Index for All Urban Consumers in October marked a 31-year loftier.

The problem with inflation is that it has the potential to sap consumer and enterprise buying power. Even though wages are going upward for workers, much of their buying ability could be stripped abroad by ascension hire/home costs, markedly college free energy prices, and even above-average food inflation.

If the next few inflation reports from the U.South. Bureau of Labor Statistics come in at or above 6% over the trailing 12-month menstruum, the likelihood of this surge in prices beingness transitory starts going out the window. Wall Street won't like that 1 bit.

A red sedan being fueled up at a convenience station gas pump.

Image source: Getty Images.

three. Energy price indigestion

Rough oil could also spell doom for Wall Street over the next 3 months.

In my view, rough is easily the most fickle commodity. If the toll shoots too high, consumers and businesses either buy less fuel or, if possible for businesses, laissez passer forth higher fuel costs to customers. On the other manus, if crude prices tank on fears of some other variant, it can injure task creation in the free energy sector and even reduce overall confidence in the U.S. or global economy.

In other words, the oil market needs to provide some semblance of stability over these adjacent three months. If the per-butt cost in one case again jumps higher up $80, inflation fears could dominate. Meanwhile, if information technology falls below $50, sectorwide investments could be curtailed.

A fanned pile of one hundred dollar bills set atop a larger fanned pile of Treasury bonds.

Prototype source: Getty Images.

4. Fed speak

The tone and actions of the Federal Reserve could also crusade the stock market to crash over the next iii months.

For much of the by decade, the nation's central banking company has been extremely accommodative. This is to say that interest rates accept been kept at or near historic lows, which has allowed growth stocks to borrow cheaply in order to hire, learn, and introduce. Further, the Fed has fairly aggressively bought long-term Treasury bonds and mortgage-backed securities to encourage lending and confidence in the housing market.

But with inflation soaring, the Fed is going to have no choice just to eventually raise interest rates and brainstorm slowing its bond-ownership program. To put things mildly, investors take been spoiled with a long stretch of historically depression lending rates. Any talk of a faster-than-expected rate hike could quickly sink the Southward&P 500.

The facade of the Capitol building in Washington, D.C.

Image source: Getty Images.

5. A debt ceiling impasse

Keeping politics out of your portfolio is mostly a smart move. Simply every once in a while, politics can't be swept under the rug.

We're currently less than 2 weeks away from the Dec. 15 borderline when the federal debt limit volition exist hit. If we reach the debt limit without a deal in Congress, the Treasury Department wouldn't be able to borrow. This ways salaried federal employees may non get paid at a time when inflation is rising and the U.S. economic system is even so finding its legs following a wicked (simply short) recession. It may fifty-fifty mean the U.Due south. defaulting on some of its debts, which could adversely bear upon its credit rating.

To exist clear, this isn't the first rodeo for lawmakers when it comes to a debt-ceiling standoff. But the longer Congress waits to resolve things, the more likely it is the debt ceiling could weigh on equities.

A businessperson's hand reaching for a neat stack of one hundred dollar bills used as bait in a mouse trap.

Prototype source: Getty Images.

half-dozen. Margin debt

Generally speaking, margin debt -- the amount of coin borrowed from a broker with interest to purchase or brusk-sell securities -- is bad news. Although margin can multiply an investors' gains, it tin also chop-chop magnify losses.

While it's perfectly normal to meet nominal outstanding margin debt grow over time, the speed of its increase in 2021 is very alarming. As of October, almost $936 billion in margin debt was outstanding, co-ordinate to the Fiscal Industry Regulatory Say-so. That's more doubled since the midpoint of the previous decade.

More than importantly, margin debt rocketed higher past more than 70% earlier this year from the prior-year period. There have but been iii instances since 1995 where margin debt surged over 60% in i yr, co-ordinate to analytics firm Yardeni Inquiry.  It happened just before the dot-com bubble burst, months prior to the financial crisis, and in 2021. That doesn't bode well for the stock market.

A person texting on their smartphone, with a chat bubble appearing above the device.

Prototype source: Getty Images.

seven. The unwinding of the meme-stock merchandise

Twice a year, the Federal Reserve releases its Financial Stability Written report, which examines the resilience of the U.Due south. financial organization and outlines some of the bigger virtually-term and longer-term risks worth monitoring. In the latest report, the nation'south central banking concern examined the possibility that young investors putting their money to work in meme stocks like AMC Entertainment and GameStop could enhance volatility and disrupt the marketplace.

The report points out that the younger investors involved in these trades "tend to have more leveraged household residue sheets." Losses in the marketplace would leave these folks more than vulnerable to coming together their debts. Plus, with these individual regularly buying options, risk is further magnified.

The Fed also notes that social media interactions, including the transmission of biased or unsubstantiated claims on message boards, could lead to increased volatility and a "potentially destabilizing issue."

A magnifying glass laid atop a financial newspaper, with the words, Market data, enlarged.

Image source: Getty Images.

8. Valuation

Valuation by itself is oftentimes not plenty to send the stock marketplace over the edge. Only when market valuations achieve historically high levels, information technology'south an entirely different story.

On Dec. 1, the S&P 500's Shiller price-to-earnings (P/E) ratio was 38, and it had recently hit 40 for only the 2d time in 151 years. The Shiller P/East takes into account inflation-adjusted earnings over the past 10 years. For comparing, the boilerplate Shiller P/E for the S&P 500 dating back to 1870 is 16.89.

However, it'southward not how far above its celebrated average Shiller P/E that'south worrying. It'due south that following the previous 4 instances where the Shiller P/East topped 30, the S&P 500 somewhen went on to lose at to the lowest degree 20% of its value. When valuations get over-extended, as they are now, history has shown that crashes become commonplace.

Silver dice that say buy or sell rolling across a digital screen displaying stock charts and volume info.

Image source: Getty Images.

9. Investors stick with history

A ninth and final reason the stock market could crash over the next 3 months is history. Specifically, if investors are of the belief that history repeats itself, the S&P 500 could be in trouble.

Dating back to 1960, in that location accept been nine bear markets. Following each of the previous behave-market bottoms, excluding the coronavirus crash, we witnessed either ane or two declines of at to the lowest degree 10% within 36 months. In other words, billowy back from a behave market lesser is a process that often hits speed bumps.

But since the March 23, 2020 bottom, it'south been an almost straight shot higher for the S&P 500. If Wall Street and investors were to bet on history repeating, they might lighten their portfolios in expectation of a double-digit percentage pullback or crash.

This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- fifty-fifty one of our own -- helps usa all recall critically about investing and make decisions that help u.s.a. become smarter, happier, and richer.