For the past year (and longer) we’ve been reading article after article about how the stock market is set to implode, and yet, here we are… another intra-day record high for the Dow Jones Industrial Index.
The Market Will Go Down… Eventually
The truth is that the stock market will go down sooner or later. It always does. And, when it does, many of the people writing these now year-old doomsday articles will attempt to claim credit for “predicting” the market crash. (Although, there may not be a crash. A simple months-long 5% correction would take care of a lot of the market’s pricing issues.)
What they won’t do is tell you how much money they would have cost you if you had listened to them while the run up continued.
Consider this: The Dow is up over 17% for the 1-year period. In other words, if you had gotten out when last year’s alarm bells started ringing, you would have missed a 17% increase in your investments. That 17% increase would have a very large cushioning effect on any sort of coming 10% correction, or even a 20% crash.
In other words, if you had been listening to these people all along, you would end up losing money when the time comes, not made money, and yet, when the downturn does come (my guess is early next year, due mostly to political turmoil and the Fed trying to jam in one more increase before year end, but that’s a different article), those same people will rush to claim the “I told you so,” mantle. Then, a few years from now, the process will repeat itself with headlines like, “He predicted the 2018 Market Slide, Now He Says Stocks are Overvalued Again.”
I’m not kidding. Do a Google search and you’ll see dozens of headlines just like that. They started coming out back in 2015 or earlier.
What To Do About Investments Now
As always, the better strategy than listening to talking heads on TV, or faceless online financial analysts is to have a diversified portfolio that you rebalance on a regular basis. If you have been doing that, you are up enough over the last 12 to 18 months to absorb all but the biggest of crashes, and if that crash never comes… well, then you just get to keep that profit.
If you’re feeling saucy, here is today’s apocalyptic warning that the stock market is 66% higher than it is supposed to be. I guess if you’re going that route, then there is no cushion. Of course, a financial reckoning like that would be so severe that the value of your 401k would the last thing you cared about as the mobs took over the streets and the dollar became worthless. If you are going down this road, focus on how to stock up on food and defend your home, not how to hedge your investments.