When Will the Markets Crash?
It’s a simple question, that leads you into a deeper investigation of where you are within the stock market crash timeline. You’re here, at the peak, not knowing where the tracks suddenly fall off.
Knowing what a stock market crash is, is the first stage of a strategy to help you avoid huge losses. Corrections aren’t a big problem, just wait a few months and it recovers. But crashes are devastating. And right now, the stock investing party is getting kind of loud. Investors should consider the threats.
No one is certain if the stock market will crash. If signals, governments, the media and other bad actors synchronize, then the markets will crash, most likely beyond 2023. These signals show the intent of market players. When the party’s over, the balloons get popped. So you have two years to party!
Everything Seems Good Until 2023
Economists and brokerage CEO’s are saying everything’s rosy till 2023 (unless it isn’t). That’s the number they use. 2024 gets no support so so sometime in 2023, the bubble could finally burst. But when do things ever go as planned. It’s like the fire is being fanned, and it could happen sooner, inside an economic boom.
Harry Dent, the forecaster who never seems to get it right believes its 2 to 3 years away. Remember, we’re not talking about a correction, although a correction would let out some of the inflationary steam. This would at least delay the big crash till 2023.
Market Crash History Won’t Help Us Much
Most studies or expert views on whether the markets will plunge, revolves around historic data. But investors and governments don’t respond to historic data. It’s people and what they believe will that generate the next crash.
It’s not to suggest a crashing of the stock market is imminent, but rather a warning that factors are present that could cause one. Just because we have a bubble stock market, doesn’t mean it will burst. Having so much stimulus injected into the economy may indeed ensure 5 more years of economic growth, low unemployment, and investment success.
Winning and Losing
The dangers of a stock market crash, or economic recession aren’t just portfolio numbers. Many small business owners lost everything in the Covid recession, and many were still recovering from the financial crisis. Technology sweeps in during these periods putting more nails in the old business coffins. So the impact can be lasting and painful, yet may be good for the long term health of the USA.
The history of stock market corrections and crashes shows they’re preceded by investors overbuying and overvaluing stocks. Currently, few investors are concerned about a market crash. They’re piling their funds into stocks that have 30 to 1 P/E ratios or worse, which experts call insane. Others are piling into Bitcoin, a product that is digital and fake. It has no backing of gold or anything and it’s unregulated. It’s likely going to crash hard.
A few smart investors will use crash hedging strategies to protect themselves. Others are day traders and intend to get out, or sell short just as the crash events begin. Everyone believes they’ll get out just in time before their portfolio gets hit. Others in hedge funds and mutual funds and pension funds will get hit hard too. And then there’s the grossly over-leveraged investors who see their world collapse.
And if the market does crash, which will be the best stocks to buy? Will it be 5G stocks, EV Stocks, tech stocks, or will Walmart, Costco and the FAANG monopolies have an extended bull run? The whole point of studying market crashes is to time your departure from growth stocks and transition to cash or to specific stocks that will weather the crash. Then it’s onto the next big thing.
Are We Certain 2023 is the year of the Stock Market Crash?
It’s all conjecture, despite supporting data. It’s the question no one can answer. The when and how are still a mystery and you’re on your own to prepare to leave the market early or use a hedging strategy before 2023. See the stock market crash post for info on that. Can the 1929, 1987, 2007, or 2020 stock market crashes or the .com market crash be our guide? Not really, the markets were different then, and in some cases, what’s happening now (stimulus, low interest rates, and high regulation) is the opposite of what happened then.
But investors back in the 20’s that the inflation of the roaring twenties would send stock values into the stratosphere, which didn’t make sense. Suddenly, in 1929, it happened. It was a human, emotion driven event that decided a Stock Market Crash timing. Everyone rushed to exit, but too late. The crash left everything worthless.
The government stopped spending. You could say it was the naivete and incompetence of the government that caused it. Volatility increases, along with negative chatter and warnings, and then events happen that force the crash or leave investors with no hope. In a market panic, there is no reasoning.
Right now, faith in the markets is highly dependent on the Democrats stimulus program. But some Democrats and Republicans don’t believe it’s good and could vote it down. If the stimulus bill doesn’t pass, that could be a spark for a strong correction.
Balloons take some time to fill, but only a micro second to burst. A lot like human emotion
The stock market bull run has been running for over a decade, and this latest pressure will force it to the peak. So it all depends on how Joe Biden manages the pressures of this peak period. Trade wars, too much leveraged debt, inflation, and a sudden stoppage of stimulus could start the slide. Fast tax increases could scare the wealthy who are used to storing their profits offshore.
Another factors can be media suppression. Investors may not get the crash signals because Google, Facebook, Twitter and other sites censor content. Do a search on Google, and you’ll only “authoritative” voices touting safe messages to the masses.
Wikipedia: Stock Market Crash?
Wikipedia’s definition of a stock market crash is sufficient, citing the human emotion that drives the sell off.
A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors.
They often follow speculation and economic bubbles. A stock market crash is a social phenomenon where external economic events combine with crowd psychology in a positive feedback loop where selling by some market participants drives more market participants to sell.
Few experts publicly discuss the personal and business aftermath or carnage of a stock market crash. These are consequences that investors and others fear most.
The last sell off in April of 2020 didn’t seem to hurt investors, as valuations came back strong due to the Fed’s stimulus bailout. If not for that bailout, the financial system in the US and around the globe would have been catastrophic. The 2007 financial crisis hit just after a boom in stock prices and home prices. It was an avalanche type of failure that hit hard and lasted years and launched a housing market crash too.
So let’s not take the matter of stock market crashes lightly. Millions of people will lose a good deal of their wealth during the next one, not to mention suffer severe personal, health, and financial suffering for years. It’s not their fault, they just didn’t have anyone to warn them about what was to come. The financial tsunami will hit them unaware.
Preparing for the Next Stock Market Crash
And we’ve got time to prepare for this next market sell-off, major correction or crash. We don’t know when or how severe it will be. The federal governments of all countries are spending their way out of the Covid 19 recession. That is causing a market bubble. You see it clearly in stock prices and home prices.
You’re likely wondering whether it’s going to happen because you’ve see some new stories and Youtube stock market crash videos. And you’re wondering how a stock market crash typically happens, to understand how this one’s going to go down. There’s a lot of economists and stock market brokers forwarding their thoughts.
Is Inflation the Key Threat?
Some of these experts have very sophisticated points of view. One I read last night was focused on inflation and the technical issues that make inflation a big threat. Inflation is one of the key factors in pre-crash periods. In his explanation, he believes stagflation is more likely rather than inflationary overheating.
What inflation does is put everyone into a negative mindset, and undermines business profits. The cost of inputs are so high, businesses can’t operate and at some point, they give up. Then taxes can’t be paid. Usually, when inflation peaks, the government comes in with higher interest rates and that crashes the markets.
I like the effort many are putting into understanding the stock market crash threat. It’s because no one seems to have a real handle on it. Of course, in the US, no one really knows how the Democrats and Joe Biden will react to inflationary overheating. J Powell says it won’t happen on his watch.
The huge amount of stimulus funds plus the recovery is already heating up prices, and companies can’t ramp up manufacturing fast enough. From rental cars to restaurant supplies to computer chips to home construction materials, there are shortages and that will drive prices even higher.
Take a quick look at the stock market crash factors so you have the key forces in mind. In your investing strategy, you’ll like want to take 5 year outlook, past the inflationary stimulus period to the quiet period beyond. Which stocks to buy?
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