Let’s look at the different factors that contribute to a market crash to see when a crash might occur. We also go into what the experts are predicting with regards to the timing of the market crash.
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One of the most popular questions that I get asked, is when will the stock market crash. What are we talking. 2020? 2021? Or within the next 5 years, 10 years. And it’s a great question, that’s what markets do, they go up and eventually they crash. Cycles of greed and then cycles of fear. But the question is when will be the next cycle of fear. Aka, when’s the next market crash? And I’m going to be honest here. I do not know exactly when the next market crash will be. The only thing that I can do, is look at history and past statistics, to try and get a feel for around when it might take place.
So let’s dig straight in to this. The first thing and the most obvious thing that we should look at is the history of market cycles. So let’s go back 150 years. There’s been a lot of momentous events that have resulted in huge stock market crashes.
Black Monday anyone investing in those days will never forget the day the market crashed by 22% in a single day. Inflation mixed with the Vietnamese war, that would have been an extremely tough period to be in. And of course probably the most well known one in history the 1929 crash and great depression. This literally changed a generations mindset to investing.
Anyway the main thing that we can take from this graph is that market crashes tend to occur on average around every 8-10 years.
Now let’s test your memory. When was the last recession. That would be… In 2008, the housing bubble crisis. Which means let’s do a quick bit of math, it’s been 12 years since the last stock market crash occurred. Which means if you go by what history tells us, that we are around due for the next recession to come…
But of course it’s not like it occurs exactly on the dot every 8-10 years. Unfortunately there’s always room and leeway. And the market is never something that can be perfectly forecasted even if you look at history.
But I will tell you one indicator that I think all of us investors should really be following when trying to think about when another market crash will occur or a recession. And that indicator is the unemployment rate…
Now this graph takes us back around 70 years in time. And if you have a keen eye , you would notice something out of the ordinary sticking out. And that is the unemployment rate in 2020. That massive spike that you can see at the end of the graph… We’ve never seen something like this before, unemployment rising to such a high figure in literally the click of your fingers…
So for those interested in what the economy and the stock market might do in the short-term, keep a close eye on this figure. Because if these unemployment rates, remain at high levels, the economy is inevitably going to go down soon. Because if you have so many people not working, compared to previous years, you can’t sustain the amount of output that you had.
But on the other hand, the opposite is also just as likely. As well all know things are things are starting to go back to normal. Businesses reopening, people starting to go out more, and hopefully this results in the unemployment rate going down… This will be a key figure to watch to see if a crash will occur in 2020, 2021, or if there’s a lot longer to wait…
The other thing that I like to do when trying to get a feel for the stock market is see what the billionaire investors are saying. Now there’s definitely a few out there that let’s just say are not bullish on the stock market in the short-term. Stanley Drukenmillar the billionaire American investor is one of those guys. He said the risk-reward calculation for stocks is the worst he’s seen whilst working in stocks, and that the government stimulus programs won’t be enough to overcome real world economic problems.
DISCLAIMER: It’s important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.