Will the Market Crash Soon?

will the market crash soon

We may or may not be headed for a market crash

Will the market crash soon? Some say yes, and some say no. There is really no way of knowing until the market actually corrects. Afterwards, people who believed that the market was in a bubble will say “I told you so.” But, trying to predict if the market is in a bubble right now is hard if not impossible. Let’s take a look at some differing opinions on the subject.

The Market Will Crash Soon

There are plenty of analysts out there who believe that the market will crash. One recent article  from Morningstar suggests that we are in a market bubble due to multiple factors including low interest rates, a disregard for traditional valuation when analyzing new technology stocks, investor amnesia to past events, and a new math to determine if investments are priced correctly. The article then goes on to point out some anecdotal evidence of a bubble. Things such as overconfident people quitting their day jobs to pursue an investment class, and market forecasters operating on pure emotion and optimism are cited as evidence that we are living in a bubble.

The Market Will Not Crash Soon

There are just as many and just as convincing arguments on the other side of the aisle saying that we are not going to face a market crash. Financial Times recently posted a story arguing this point. The article is rather complex and technical, but it basically dives into the relationship of corporate profits combined with ultra-low rates making the current market reasonably priced. It also dives into expected returns by investors concerning equities versus safer asset classes, and it touches on the broader and more diversified portfolios of average investors compared to the past.

What Does This Mean for You?

So, should you be concerned? Which opinion should you believe? These are hard questions to answer, but it becomes clearer once you figure out what type of investor you are. An active investor who is regularly trading will want to pay a lot more attention to market peeks and throughs than would a buy and hold investor who is holding positions for decades.

If you have a 401K that you are investing in it regularly, then it is most likely made up of various funds designed to produce steady yields over time. A market bubble popping won’t matter much as long as you have time on your side. If we enter a recession, but you still have 25 years until retirement, then just stay the course. Don’t panic. This is a marathon for you, not a sprint. If you are nearing retirement, then you have hopefully already shifted some of your holdings to more conservative assets. If so, then a market crash won’t have much of a negative impact on you.

However, if you are a trader, then you will want your finger on the pulse of the markets constantly. Market run ups and crashes can create opportunity for you. During a bubble you might want to sit on the sidelines and wait until things are on sale. Buy low and sell high they say.

Conclusion

We may or not be on the cusp of a market crash. No one really knows for sure, and there are multiple very strong arguments on both sides. The main takeaway is to not lose too much sleep over it. You should either have a long-term time horizon where a short-term market correction shouldn’t derail your goals, or you are an active trader constantly tracking the market. In the case of the latter, any market moves up or down will create opportunity for you. So, the market might be in a bubble. Markets go up and markets go down. If you stay the course and keep focused on your goals, then you will come out ahead in the long run.

Read Also:

Are we in an Index Fund Bubble?

Never Lose Money In The Stock Market

Things to Look For When Investing in Small Cap Stocks

Strategies to Help You Gain Success with Stock, Cryptocurrency and Forex Trading

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