I’ve been searching the headlines to see whether the experts think we’re in for a new stock market crash.
It is, I admit, partly for fun. That’s because it’s a bandwagon that people love to jump on. And it’s been said that for every crash that actually happens, the experts predict 10.
I did find one thing that scared me a little though: “If the stock market crashes, will I lose all my money”? seems to be a popular question. And I think we should put that one to bed right now.
Lose my money?
The experts reckon it’s very unlikely. Investopedia, for example, points out that we “may lose value, but that can be temporary“.
We’d have to be very unlucky to lose it all. Like recklessly putting all our cash in one stock that goes bust, or something like that.
What actually is a crash, anyway? There’s a general consensus that a correction is a fall of 10-20%. So is a crash a fall of more than 20%?
Well, the events of early 2020 were widely labelled a crash. And at its lowest point, the FTSE 100 briefly fell 30%. So a big fall, but not close to 100%. And two years’ later, it had regained all its losses.
The headlines
We can try to protect against volatility and reduce our losses in a stock market crash by diversifying across sectors, and by holding for the long term.
But will we get another crash soon? There are plenty of talking heads out there who are constantly negative, and who talk up a crash with almost every breath.
Madness?
The S&P 500 could crash by 50%, 60%, and more, according to various sources. And some are likening the bullish US market to the madness of Tulip Mania, and to the South Seas Bubble.
S&P 500 stocks do look a bit hot, and they could fall. But let’s keep some rational heads, shall we?
Nasdaq stocks look cheap to me, by contrast. And nobody can convince me that the FTSE 100 is overvalued right now, not with dividends predicted to set a new all-time record in 2024.
Listen to good sense
When I dig below the surface, I actually find good sense out there.
MarketWatch writer Mark Hulbert says: “There’s a one-in-five chance that over the next 30 years the US market will suffer a 20%-plus single-day plunge.”
As a long-term investor, I can live with that, especially as most crashes tend to recover fairly quickly.
The story points out that there’s always a chance of a crash. But the probabilities are low, and get better the longer our timescale.
So no, I don’t pay much attention to those going for the most alarming headlines to draw in the eyeballs. I much prefer rational takes that put things into proper perspective.
What I’ll do
And if we do see a 2024 crash, I’ll be buying as many fallen shares as I can. Because buying low to sell high in the future is what we all want, right?
