Should we brace for a stock market crash?

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  • #2
anorlunda
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here is a lot of talk about the risk of a major stock market crash in the near future.
Has there ever been a time when that was not true?
 
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  • #3
phinds
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Economists have predicted 9 of the last 5 recessions.
 
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  • #4
Rive
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Should we brace for a stock market crash?
Yes&no.

Yes: stocks are high and there are signs of grown bubbles. As part of the 'business as usual' (!), a crash might happen anytime.

No: I know some guys who cried wolf on every dip for a decade by now. Should they just went with the trend, they would be rich by now.
 
  • #5
Astronuc
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There is a lot of talk about the risk of a major stock market crash in the near future.

https://www.businessinsider.com/sto...-2023-us-economy-avoids-recession-2022-11?amp

Are you bracing for this, and if so how?
I think Business Insider tends to be alarmist on such matters. There are up and downs.

When I read a story like the one cited, I wonder of some are trying to manipulate the market, i.e., scare investors into dumping stock, which drives down the prices, which some then scoop up at a discount. Clearly, if enough investors lose confidence, then it may be come a self-fulfilling prophecy.

I've seen stories about the market crashing to the market rebounding in 2023. There is other commentary about inflation persisting to correcting, and predictions that the Federal Reserve will drive down interest rates.

What to believe. One could simply sell equities on days their price goes up, and sit out the market for weeks, months, through next year? One could try and guess the sentiment, assuming one has confidence of whatever information is at hand and try to determine based on historical performance, which has some uncertainty (or uncertain uncertainty).
 
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  • #6
russ_watters
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There is a lot of talk about the risk of a major stock market crash in the near future.

https://www.businessinsider.com/sto...-2023-us-economy-avoids-recession-2022-11?amp
The article doesn't say a crash is coming, it just says the bear market could slow-roll for a while and the market could end up down another 30-40%. That's based on the current p/e ratio vs the historical average. It's a decent bet, but not guaranteed. For whatever reason though it feels like it's already down more than it is (17%). But we have a long way to go to compare to 2008 or 2000, and I don't see reason to believe we'll get there.
Are you bracing for this, and if so how?
The same way I always do, using the technique most investment managers recommend: I'm ignoring it.
 
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  • #7
gleem
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There could be, there might be; If we get enough people thinking about a bear market then we will have a bear market we'll just queue up and jump off the cliff. Who wants the market to go down? Warren Buffet wouldn't mind, remember his quote; “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.

If you are speculating then speculate, if you are investing, sit tight and think about other things.
 
  • #8
Vanadium 50
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Will there be a downturn. Yup.
Will it happen soon? Who knows.
Are there factors both for and against it happening soon? You betcha.

All we can do is invest assuming that it will go up and go down and try not to get into a spot where knowing what will happen is critical to your goals.

I am of course talking about stocks. Stonks, on the other hand, only go up!
 
  • #10
Tom.G
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Stonks, on the other hand, only go up!
Strange. I think this operational version is designed to then go down. :wink:

STONK noun​

ˈstäŋk
plural -s
: a heavy concentration of artillery fire
call for a good stonk about five hours before our assault Infantry Journal

Compliments of: (https://www.merriam-webster.com/dictionary/stonk)
 
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  • #11
Vanadium 50
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heavy concentration of artillery fire
Not so much of a problem so long as "stonks only go up".
 
  • #12
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Trying to time the market is a bad idea. That's just Investing 101. If you think you can figure it out by reading a published article then you're too late. The market will have already reacted. If you think you can figure it out ahead of everyone else you're just gambling.

There are good reasons to be concerned about the trajectory of the stock market in the coming years. But that was true at the start of the pandemic too. And it was true before then. To eliminate risk you sell everything but then you risk being run over by inflation. So you have to find a balance.

I sold some things at those two times. I would have made more on paper had I not made those sales. But for me it was the right decision to reduce my investment risk in those areas. I don't regret it even though my net worth is less than it would have been had I done nothing.

Investing 101 again: Figure out what level of risk is right for you. Consider the current economic environment as part of that but not the only thing, probably not the main thing. And then adjust your investments accordingly.

Take a basic class on investing at a community college. Or get a good book and read it.
 
  • #13
vela
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If you think you can figure it out ahead of everyone else you're just gambling.
You make it sound like gambling is inherently bad. It's not bad if you can tilt the odds in your favor. The problem is that takes considerable time and effort, but it can be done. Peter Lynch was really good at it when he ran the Magellan Fund. In his books, he noted all of his picks didn't work out, but enough did so he could consistently beat the market.

Most people, however, don't have the time nor the inclination to research stocks, so their best bet is to just buy and hold index funds. The important thing is to be in the market rather than waiting on the sidelines trying to find the perfect time to enter.
 
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  • #14
Vanadium 50
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I think Business Insider tends to be alarmist on such matters.
Bad news sells. "If it bleeds, it leads".

Looking at the title, I do not believe that I am better to predict a bear market than people who get paid lots of money to do so, and that's their full time job., I just don't. Further, bear markets happen. So the best strategy is to be prepared for one - which means, as much as possible, to continue to invest regardless of whether it is going up or going down and stay close to my optimum asset allocation.

Will bad times be bad? Probably. That's why they are called that. It's best not to "brace for a stock market crash" but to "be braced for a stock market crash".
 

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