Never trust anyone who says they can predict the stock market or the overall health of a nation's economy. Aside from looking like a moron, you look like a complete moron. It happens all so quick, we can't really forecast it or even explain why any of the major indices suddenly lose 1 - 5% every day until after the recovery.
Of course, we praise the folks that suddenly say "hey, the market is about to crash" and coincidentally, maybe even ironically, it crashes. But nevermind that, enough talking trash about the bears of wall street. We can, however, have a hunch, using historical context and evidence of when we'll go into a recession. It's all a huge cycle, indices hit all-time highs, something happens, we go into a recession, we recover from the recession, we reach the last average we were at prior to the recession, reach all-time highs again, something happens, we go into a recession... rinse and repeat. The huge indicator is the "something happens" portion of the cycle. We can speculate and talk about a few things that may happen in the near future where we could face a market correction or a recession. Here are two risks we can run into.
During the 9/11 terrorist attack, the Dow fell 14% that week, while the S&P fell 11%. Any sudden tragedy we are faced with can result in a correction that is very rapid. However, I say "terrorism" and "nuclear warfare" in a hesitant manner, as investors have been resilient to tragedies and threats these past few years. Take the Manchester bombing as an example, the following day, European markets hit all-time highs. Closer to home, we witness the Dow, S&P, and NASDAQ finishing green after the Vegas shooting. At the beginning of the year, we received news on how North Korea was testing missiles and launching them at unsettling rates/distances, quickly leading to a 1 - 1.5% downturn on the major indices. After more news stories rolled out about the geopolitical tensions, the markets genuinely stopped caring and proceeded to finish green by 4.
This one is a biggy, our president (lord and savior) Donnie Trump has promised numerous corporations and businesses, as well as all Americans, huge tax cuts. It was one of his campaign promises. The moment he was in office, investors have gotten this illusion of the tax cuts and imagining the dividends they're about to swim in the moment huge publicly traded companies can retain A LOT of their net income and place it on their cash and cash equivalents portion of the balance sheet and ramp their dividend yield like there is no tomorrow. This promise has caused a euphoria and high in the stock market. No pun intended.
Failure to meet investors expectations or even worse, not pass a reform, will cause turmoil and panic. The realization that this bull market is overvalued and has been fueled by nothing other than greed, that isn't reflecting a companies balance sheet or P/E ratio will bring this market to a quick downturn.
Enough doom and gloom. When will this happen? Who knows, just have some bonds in your portfolio and you should be good. Hang tight, historically, the markets have gone nowhere but up, we get pulled back every 3 - 5 years and the downturn only lasts 1.5 years, I think it's best to buy stocks at cheap prices and ride it into the next bull market. But I'd like to hear some of your thoughts, why would we potentially face a recession or a market correction? Comment below!