Let’s face it; the stock market is so uncertain that the only thing experts can say about it is how unpredictable it is. One day it is up, and the very next day it goes down. This cycle is dependent on so many points, and no one can truly understand it. Hello, and welcome to my blog. This is the only channel where you can get the best of financial investment, stocks and more. This time around, I will be discussing the topic “when would the stock market crash?”
Of course, this is impossible to know, but at least expert or experienced investors can be notified through warning signs. There are several warning signs that when put together have been present in the various market crashes that have happened over the years. Let’s find out what they are.
Signs of a stock market crash
Market cycle history
When speculating on when the next stock market crash would be, observe the market cycle history. In the past years, a lot of occurrences fueled the crashes of the stock market. Any investment during “Black Mondays” would not be easily forgotten by any investor when the market crashed 22 per cent in a day. Those moments were tough due to the Vietnam war, coupled with inflation. The 1929 stock market crash is another well-known incident that led to a lot of discouraged investors.
In summary, the market likely crashes in the middle of every 8 to 10 years. The last recession took place in the year 2008, which was “The housing crisis”. According to historical clues, the next recession to come is around the corner. It has been 12 years since so it makes sense to see a crash now. However, there is a probability that it does not occur exactly every 8 to 10 years. The exact time it will occur is very much unknown.
However, as much as this indicator is largely uncertain, there are still a few other indicators that can give a strong sign that a stock market crash is on the way. An indicator that can be helpful is the “Unemployment Rate”.
The unemployment rate
For 70 years, the Unemployment Rate in the US has been on a really slow rise, but in recent times it has gone up greatly. If you want to predict the stock market crash, get updated on how the Unemployment Rate increases. If it increases consistently, there’s every tendency that the economy will plummet soon. The greater the amount of people who are unemployed in the current year, the lesser the amount of output.
On the other hand, with things taking shape and returning to their best state, we can be hopeful. Businesses are opening again, and people are finding ways to obtain income. With this possible turn around, there might be a halt in the continuous increase in the Unemployment rate, and maybe we won’t be seeing any further crash in a year or two.
Billionaires investors’ view
Another thing you can do when trying to find out how the stock market is doing, be updated with billionaires’ opinions. There are several investors now who do not seem to trust the short term progress of the present stock market.
According to the American billionaire investor, Stanley Druckenmiller, who has indicated that the situation of the world is not at its best and even the government’s help might not be enough. He goes on to explain, although the government is giving lots of hope to their people, it is still not a hopeful situation. In my post ‘The rise of the stock market‘ I explained how much the governments have worked towards boosting the economy. The situation looks likely to last for a long time, and the world’s economy might end up bankrupt. He went on to say that the stock market, as great as it is looking, now might end up falling again in a short while.
David Tepper, the hedge fund billionaire manager, when asked about the overvalue of the stock market, said; that this was the second most overvalued stock price. This is only second to the events of 1999, the dotcom era crash. He goes on to say that the price is too high for the situation of the current economy. He says this is because there has been a lot of misallocation of capital and this has left the market full of investment.
As with any other sharp investors, these billionaire investors do not like to have a prediction on what is likely to happen in the stock markets for a short period. But the question that is yet to be answered is when would the stock market crash occur? A crash is inevitable, but again I say, this is not a possible prediction, and even these indications cannot be fully trusted.
Rate of interest
This remains one of the major indicators of the well-being of the stock market. I believe that this can truly show if a crash is close at hand. According to Warren Buffett, who said, “Everything should be measured against the rate of interest, basically, and the interest rates fixings like gravity on any valuation.” When rates of interest are low, there would be no gravity on the stock market. When there is no gravity from interest rates, then the stock market rises.
To understand this; investors have two places to save money, it’s either in the stock market or Bonds/Banks. The return amount that is on Bonds depends solely on the rate of interest. If there is a low-interest rate, expect a low return. Most of your capital would be put to work in the market. If interests are high, expect a high return as more capital comes from the market.
The current interest rates are low, which has discouraged investors from putting their money in them. And unless the interest rates increase, then the stock market will remain full of investors money.
But there is a clause here because the interest rates are low, a lot of companies are borrowing money which they use to invest in themselves. The result of this goes two ways; first, the investment in their companies has given individual investors the confidence to keep investing. And the second route is that the economy might not do so well, and these companies with debts will end up bankrupt. Due to so much uncertainty, there is just no telling when a stock market crash will happen. If you found this blog useful, then be sure to leave a comment, like, and share. If you would like to get great contents like this, then be sure to subscribe.
Recommended books for further reading:
- The Millionaire Next Door
- Secrets Of The Millionaire Mind
- Think and Grow Rich!
- Money Master the Game
- Money: Know More, Make More, Give More:
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