Yes, according to the “experts”.
These “experts” understand economic and stock market cycles. The overriding tone of each is that the current 10 year period of economic gains is coming to an end. No one, including these men, knows the exact month the market will begin its decline. However, in viewing all of these comments, the consensus is that a serious decline is likely to begin within the next two years.
- Warren Buffett: “Be prepared to lose half your money.”
- Alan Greenspan: “There are two bubbles – a stock market bubble and a bond market bubble.”
- Ben Bernanke: “In 2020, Wile E. Coyote is going to go off the cliff and look down.”
- Jim Rogers: “The next stock market crash will be the worst in our lifetimes, and it will happen within the next two years.”
- Scott Minerd: The market is on a “collision course with disaster,” and expects the worst of the damage to start in late 2019 and into 2020 – a 40% plunge in stocks.
Some investors and even investment advisors are resigned to just ride the market down and accept whatever pain that delivers. However, if we believe a collapse in stock prices is coming, why not seek to lower that risk – and the pain associated with it? Have the past crashes not taught us anything? Is the pain now a distant memory for many investors? The traditional answer is to mix one’s stock investments with bonds or bond funds. All five of the above experts are rejecting that type of advice. Each is saying that bonds will inevitably decline if interest rates go up – and none of them are disputing the potential rise of interest rates.
There have been 21 stock market crashes since 1800 according to Wikipedia. That is roughly one crash every 10 years. Some crashes are closer together and some are further apart – but on average, about every 10 years the stock market just collapses. Here we are again. It has been about 10 years since the last crash. The above experts are saying that there is a great level of risk on the economic horizon and that a major decline is unavoidable.
If the above experts and their predictions are true, what can the average investor do about it?
- Be careful of taking advice from those who think they know more than these experts, and be wary of those who have an agenda to let your money be fully exposed all the way down to the bottom.
- Consider using a strategy of lowering risk and market exposure over the next two years, depending on your risk profile and potential tax consequences in taxable accounts.
- Stay calm and do not panic – and do not try to go it alone. According to Jim Rogers, this could be “the worst financial crash you have ever seen.”
In my opinion, what matters most is from where you get your advice. Be careful.
Ben Reppond is CEO and Investment Manager of Reppond Investments. Reppond Investments, Inc. is a registered investment adviser. We may not transact business in any state where we are not appropriately registered, excluded or exempted from registration. Individual responses to persons that involve either the effecting of transactions in securities or the rendering of personalized investment advice for compensation will not be made without registration or exemption.
Investment Advisory Services offered through Reppond Investments, Inc.
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