A Stock Market Crash is Coming – But is the Sky Really Falling?

“Be fearful when others are greedy, and be greedy when others are fearful” – Warren Buffet

Economic uncertainty fills the airwaves while the stock market inches ever upward. What’s happening? 

Is a stock market crash on the horizon, or are pundits selling false doom for clicks?

Is a Stock Market Crash Coming?

The crash is coming. It’s lurking in the dark corners of this seemingly robust economy, biding its time before swooping in for the kill. 

Despite the terrifying ambiance, it’s not something to fear. The market ebbs and flows, going up and down like the tides go in and out – only not on any regular schedule.  

It’s on the upswing now and has been for nearly a decade. But nothing can go up forever. It will eventually fall, and it’s vital to keep a level head when it does. 

When Will the Stock Market Crash?

Timing the market is impossible. Every economist has a different outlook. Some constantly scream the sky is falling and look for the next market crash on any given day. 

Others sing the economy’s praises, optimistic that the massive growth will continue forever. 

We don’t know when the crash will come, but we can look to history for an idea. 

Historical Stock Market Crashes

The most famous stock market crashes in history happened in the fall. 

Black Thursday, which started the Great Depression, was on October 29. Black Monday, which started the 1987 recession, was on October 19. Lehman Brothers collapsed on September 15, 2008. 

Apparently, Autumn isn’t the market’s best season.

Spring brings renewal but also a sprinkle of stock market uncertainty. The Dot-Com bubble burst on March 10, and the “flash crashes” of 1962 and 2010 occurred in May.  There was also a substantial three-year panic that started in May of 1901. 

Despite the historical timing, we can’t predict market crashes based on seasonality. World events can easily trigger a recession, as they have numerous times in the past. 

In July of 1990, the Iraqi invasion of Kuwait led to a nine-month recession. The September 11 attacks on the World Trade Center also led to a massive decrease in stock prices. The COVID-19 pandemic shocked markets worldwide. 

 Daily speculation about what the president or fed will do also leads to sell-offs (and sometimes gains!).

A recession can occur at any time during the year for various reasons.

Indicators of a Pending Market Correction

Economists use indicators to predict what the market will do or when the next market crash will occur. Common economic indicators include the employment rate, the inflation rate, and the consumer confidence level. 

They also use the big three stock indexes (the Dow, the S&P, and the Nasdaq) to predict the health of the market itself, watching its every turn and comparing present data to points in history in a desperate attempt to predict what will happen next. 

These economists find patterns in markets, like the yield curve indicator and Sahm rule recession indicator, to predict market failures. But history doesn’t always repeat itself. The yield curve has inverted numerous times over the past few years, and each time, reporters claim doom and gloom on the horizon, yet it hasn’t come to be.

There are so many different indicators that at least one can point to a looming crash at any given point. An economist or a journalist can easily find data to support the theory that a market crash is coming.

And they do because news of economic uncertainty sells. But the truth is, despite the indicators, no one can accurately predict a coming stock market crash. 

Protect Yourself from a Stock Market Crash

The question shouldn’t be, “Is a stock market crash coming,” but, “How can I protect myself in the next big crash?”

We know a market crash is coming, eventually. But we can never know when, so preparation becomes essential to financial readiness. 

Protecting yourself depends greatly on your age and risk tolerance. 

Those nearing retirement should move some assets into low-risk funds like bonds, CDs, and a little cash. 

Younger people should stay the course. Never try to time the market. Thousands of people pull out because they think a crash is coming, losing out on massive market gains. 

Diversify instead. Choose index funds rather than individual stocks. Maintain a variety of holdings in different sectors. Maintain an emergency fund so you won’t be forced to sell if you lose your job in a recession. 

A Stock Market Crash is Coming, But It’s Not the end of the World

Yes, a stock market crash is coming. But it’s always coming. It’s a part of the natural economic cycle. 

The doomsday reporting wants you scared, so you’ll keep clicking, but you’ll only hurt yourself in the long wrong. 

Ignore the news and stay the course. You’ll be thankful you did.