The Next Stock Market Crash (How To Profit)

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THE CHANCE OF A STOCK MARKET DROP:

-Stock Market Correction: A 10% – 19.9% Decline
First, normal volatility throughout the markets is extremely common; since 1920, the SP500 has (on average) seen a 5% pullback 3x per year.
Market Corrections are also fairly common – on average, a 10% correction happens every 16 months, and throughout the last 20 years, a 10% drop has happened 11 times. In this case, the average drop has (so far) been 15.6% and lasts for 71.6 days. 

-The Bear Market: A 20% – 39.9% Decline
According to data, this typically occurs every 7-10 years – and when this happens, stocks drop an average of 33% over a period of 363 days.

-The Stock Market Collapse: More than 40% Decline Throughout The Index
Throughout the last 120 years, this has only happened 4 times. Once in 1929, again during the 1970s, and again in 2009.

THE CHANCE OF A STOCK MARKET DROP IN 2024:
The economist John Hussman makes the argument that non-financial stocks are trading at levels that haven’t been seen since 1929 and 2001. Because of that, he believes that “These levels indicate the S&P 500 is likely to return around -5% annualized over the next 12 years.”

David Rosenberg also believes there’s truth to the claims that stocks are poised to fall, saying “Just like the clown at the circus who keeps blowing up the balloon, at some point, that balloon is going to pop…And I sort of look at the stock market, right now, as that clown of the circus blowing up the balloon.” As he explains, “The S&P 500 is up 32% in the past 12 months while corporate profits rose just 4% in the fourth quarter, meaning that the vast majority of those gains clearly can’t be attributed to improvements in earnings results.” Instead, the market is simply going higher for three main reasons: A better-than-feared economy, significant jumps in earnings estimates, and the expectations of lower rates – that’s it.

The investor Jeremy Grantham also seconds this by saying that “prolonged bull markets typically begin when unemployment is high, profit margins are depressed, and stock valuations are beaten down…Current conditions are the polar opposite of that.”

HOW TO PREPARE IN THE FUTURE:

– Keep a 3-6 Month Cash Savings
That way, you won’t need to sell investments to pay for your living expenses in the event you lose your job, your income slows down, or something unforeseen comes up while the market is low.

– Diversify your investments.  
The more you spread out your money, the more you reduce your risk and volatility.

– Continue The Long Term Plan of DCA
Studies show that the best thing you can do is just stick to the plan, keep buying, and do nothing long-term. Historically, even though a bear market might temporarily lose you an average of 33% – a BULL MARKET has seen an average gain of 158%, and it lasts almost 5 times longer, at 1742 days.

– Don’t Panic Sell
Over the last 20 years, a $10,000 investment in the SP500 would have grown to $64,000 if you just kept the money invested. However, if you missed the best 10 days (over 20 years) your return would diminish down to $29,000.
https://www.visualcapitalist.com/chart-timing-the-market/

– Keep Consistent Income
An cash fund could hold you over 3-6 months while, hopefully, the market recovers – but, if it doesn’t, you want to make sure you have some consistent income to either continue buying in or paying your living expenses so you don’t touch those investments and sell when you don’t have to. 

– Only Invest Long Term
A few years is not long enough to ensure that you’ll actually make money, so – the shorter your investment timeframe is – the less likely you should be invested in something that could drop in price.

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*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice.

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