The “Buy the Dip” financial news teleprompter readers and the 30-year-old portfolio managers who have never seen a market crash are always insisting that stocks are going to the moon. Market veterans and “Hey Boomer” professionals have seen this show before. In 1987, the DJIA plunged by a stunning 22% in a single day. Today, a comparable drop in the venerable index would be 11,013 points. With bond yields at their highest level in over a year, inflation relentlessly rising, profligate government spending, and a stock market way overbought, these issues and others could lead to serious trouble.
From 2007 to 2009, during the height of the mortgage and real estate collapse, which brought us dangerously close to another depression, the market dropped a massive 57%. When the S&P 500 finally bottomed at an ominous intraday low of 666 on March 9th, 2009, we set the floor for the longest bull market in history, which ended in January 2022, but picked right back up in June of that year. Except for the recent 10% decline that began when the war with Iran started, we have been in a huge bull market for almost 4 years, led by technology stocks and Artificial Intelligence hype.
Quick Read:
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Treasury yields have soared to the highest levels in a year, with no signs of abating.
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Inflation reports recently indicated that prices are rising, much of it driven by the spike in energy prices.
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If investors see the yield on the 10-year note hit 4.75%, they should nibble; if they see the yield hit 5%, they should aggressively buy.
The analyst who called NVIDIA in 2010 just named his top 10 stocks and SPDR Bloomberg 1-3 Month T-Bill ETF wasn’t one of them. Get them here FREE.
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The analyst who called NVIDIA in 2010 just named his top 10 stocks and SPDR Bloomberg 1-3 Month T-Bill ETF wasn’t one of them. Get them here FREE.
So, where do we stand now? We may be on the precipice of a much more significant decline than we have seen since earlier this year, even as all major indices trade at all-time highs. One positive is that consumers and businesses are generally in reasonably good financial shape. Stock portfolios and home prices have increased dramatically over the last few years, and the economy isn’t teetering on the brink as it was globally in 2008, when Bear Stearns and Lehman Brothers collapsed. To avoid a similar fate, Merrill Lynch was bought by Bank of America. But that all could change, and change fast.
Between the issues with private credit, a potential AI bubble, and an overbought stock market, which is really being forced higher by a handful of stocks, it makes sense to take some precautions now. Boomers are at a juncture in their investing lives where taking a major market crash could destroy the future they worked so hard for. Here are six positive steps for those worried the stock market could crash.
