Are we all doomed? Is there a stock market crash coming that will decimate the American nation like it did nearly a hundred years ago?
Will it really be that bad? Will we all soon be waiting in bread lines for our next meal?? Or is this all just hype, and the reality is that the stock market is already at its lows and will soon flip back to its usual gains?
First off, nobody knows for sure. Every opinion is just speculation.
But, since we’re all curious and want to prepare for the future, let’s take a crack at this one based on the facts, the trends, and of course…the many popular opinions of the “experts” out there.
So what would happen if the stock market crashed soon? What would be the chain of events if the stock market took a dive?
Here’s what I see happening:
- Stock values continue to go down
- Investors grow fearful, they spend less, save more, and start pulling their money out of the market
- Lower demand in the market means that stocks continue to go down, which sparks fear, and stocks continue to plummet
- With decreased consumer spending, business revenues decrease, which causes layoffs
- The stock market goes down, corporate sales plummet, unemployment increases
- With fewer jobs, we’ll likely see more houses for sale and more foreclosures hitting the market. The value of homes may even go down.
- Then, either we slowly creep our way out of the recession or the government floods the nation with money to jolt us out quickly (based on what we’ve seen to date, I vote that we’d see the latter).
Can Stocks Go to Zero?
What happens in a stock market crash? Can stocks go to zero?
Yes, they can.
If a company goes bankrupt, their stock no longer has any value (and if you remember from your 3rd grade math class, any number times zero is still zero). Your shares of a company that no longer exists and has no value are certainly worth…nothing.
So then your next likely question…
Do you lose all your money if the stock market crashes?
If a stock can go to zero and that’s what could happen if the stock market crashes, then you’ll lose all your money if the stock market crashes…right??
You’re likely invested in many different companies (if you only invest in one, please stop and diversify!!), and the odds of every company going under is probably quite a low percentage. And, if you’re like me and you invest in S&P 500 index funds, then it’s nearly impossible for you to lose all your money (unless every single one of those 500 companies goes bankrupt…and that’s just not going to happen).
How Long Do Stock Market Crashes Last?
If we go into a crash again, how long will it last? How long do stock market crashes usually last?
Below is a chart of the S&P 500 values. I have highlighted a few of the recent stock market dips.
As you can see, we have already had quite a few market dips in our recent history. These losses in the stock market were all greater than 20% and each recovery took longer than a few months. Often, the recovery takes years to climb back to the previous highs before the market tumbled.
So, to get back to our earlier questions, how long do stock market crashes last?
Here’s another helpful chart that should help with that question. This one comes from Investopedia.
One of the longer-term stock market crashes was in 1973. This is when the economy was strong, people were investing in stocks regardless of the prices, and the rising market would seemingly never turn back. Stock prices proceeded to go into a bubble, massive inflation ensued, and the problems were then compounded with the oil crisis in October, 1973.
As you may have guessed, stocks began to tumble...
The stock market crash of 1973 was on. By December of 1974, stocks were down 44% from their prior highs.
And how long did the 1973 stock market crash last?
It took 69 months for the stock prices to come back to their original highs before the crash. That's nearly 6 years!
How about the other recent downturns? How long did those stock market crashes last?
- The crash in 2000 took nearly 5 years to recover (56 months)
- The crash in 2008 took about 4 years to recover (49 months)
- The stock market crash in 2020 took only 5 months to recover
So what does this mean for today? Will we see a deep crash again? And how long will this stock market crash last?
This is still being asked all around the globe right now. Is there a stock market crash coming in 2022?
Well first off, it's kind of already here. The markets are down roughly 20% from their all-time highs in late December, 2021. I'd say the stock market crash has already begun. I suppose the real question then is, will it go lower?
Will the Stock Market Crash Again in 2022?
So what will happen? Will we see a stock market crash in 2022? Like we said, stocks are already down 20%, but will they continue to take a dive?
What are the stock market predictions for 2022?
Stock Market Predictions for 2022
Will the economy crash in 2022? What are the experts saying?
- CNBC states that investors should hold a defensive posture, that more losses may soon ensue
- Forbes believes the market volatility will remain for some time, and that the market will continue to dive until mid-2023
- JP Morgan predicts that the stock market will recover all its losses by 2022
Based on all the commentary I've read, there are basically three categories of belief surrounding the future stock market movement.
1) Many believe that this 20% loss is only the beginning. They believe inflation will continue to rise for some time, that consumers will be stretched too thin, and that the economic demand will soon dry up, driving us further into a future recession (most estimate a total drop of 30%-40%).
2) Some believe that the Russia-Ukraine war will soon be resolved, that inflation will soon be under control, and all this stock market crash drama will soon be behind us. Demand will remain strong and the stock market will rise once again.
3) Others, like this guy, think the next 1929 stock market crash is going to happen all over again. He believes that the government has come to the rescue too often and with too much gusto. Printing money is getting out of control and all the cards will soon come crashing down.
Will There Be Another 1929 Crash?
Let's talk about this a bit more. The 'this guy' that I referred to in the above paragraph is Harry Dent Jr.
He predicts that the overall stock market could plummet by as much as 90%, which would in fact mean another 1929 crash.
But why does he believe this? Do his claims hold any merit?
He believes that the economy has been dead since 2008, but the government's influx of power and money has artificially held it up and grown it over the years. What they should have done (says Dent), is just let the market have a correction and then grown on its own. To stop meddling and printing money.
Dent then claims that the government has printed more money in the last 2 years than it has in the 13 years before that!
But is this true?...
The above chart comes straight from the Federal Reserve. After the downturn in 2020 (due to COVID), the government printed over $3.5 trillion dollars to bolster the economy. But, already 2 years later, the economy is crashing again.
What happens if the government prints a bunch more money again to combat this economic issue?
- Inflation will rise even more sharply
- People will start pulling way back on spending
- Demand for company products will reduce
- Corporations will begin laying off employees
- Economic demand will continue to weaken, which will cause the market spiral to continue downward.
It all sounds pretty scary...mainly because there's truth to what's going on here!
So will there be another 1929 crash?
Harry Dent Jr. seems to think so. Many other don't. I'm in an in-between camp.
I believe that stocks could go down as much as 30%-40%, but not 90%. I mean come on, do we all really believe that the economy is such a bubble that the true value is only 10% of what it was just a few months ago?
Personally, I don't think so.
What about housing? Will the housing market crash in 2022?
Pretty much the only time in history that homes have decreased in value was in the stretch from 2008-2012, and that was because the economic downturn was largely due to a housing market bubble.
And that's not what's going on here.
Housing values have increased because millennials (and others) are finally ready to get out of their small apartments and buy some land of their own! That, and interest rates and home material prices continue to rise, which means that people are more pressured to buy homes today (after all, the prices could continue to go up, which means home values will also continue to increase!).
Will the housing market crash in 2022? I highly doubt it.
Will home prices go down in 2022 at least?
Okay, so maybe the housing market won't crash in 2022, but will home prices go down soon?
Also, not likely.
New and existing homes are still in high demand. Interest rates are still rising. People will continue to be interested in homes, which means the prices aren't coming down in 2022.
If, however, the economy continues to soften and job losses actually happen, then we may start seeing some foreclosures and some excess supply. BUT, this isn't likely until 2023 at the earliest (it's more likely in 2024).
Will The Stock Market Recover in 2022?
Wondering what my take on the stock market is?
There are many variables that play into this; most we've already mentioned:
- Russia-Ukraine War
- Inflation trending
- The global supply chain
- The consumers' belief in the economy
If the war ends, if inflation begins to subside, and if everyone soon gets the supplies they need, people would start to feel pretty good about the economy again. Spending would rise, corporate earnings would follow suit, and the stock market should recover yet in 2022.
For all of these things to happen though...that may take a miracle of sorts.
But, might a couple positive events happen between now and 2023?
If this is the case, the market may come back some in 2022. But, if inflation is still out of control and interest rates rise along with it, the stock market may continue to plummet. I doubt it will go down to the levels that Harry Dent Jr. believes (ie. a 90% drop in the market), but it may get down in the 30%-40% dip territory.
So, perhaps the market will go up to prior highs by the end of 2022. Or, it may dip another 20%...
Not much a forecast, huh? But this is why those that prophesy what the market will do are often wrong! There's just no telling what's going to happen!
Is Now a Good Time to Invest in the Stock Market?
So what the heck should you do with your investments then? Is now a good time to invest in the stock market?
Here's my perspective:
- The market is currently down 20%
- Usually, the market goes up an average of 10% per year, which has been the case for the last 100+ years...
So, if the market is currently down 20%, but it often goes up 10% per year, then it's kind of like it's on sale by 30% this year!
And, the longer the market is down, the more chance you have to take advantage of the sale.
For me, I'm not investing in single stocks or Bitcoin to try to double or triple my money in a year. That's too much like gambling. Sure, you could win more, but you could also lose all your money.
Instead, I'm pouring money into VOO (an S&P 500 index fund through Vanguard) every couple of weeks.
If the market keeps going down, then great, I get an even deeper sale on my next purchase!
Eventually though, I believe that the market will come back and reach even greater highs in the distant future. For that reason, I'm continuing to invest now, get the sale, and then reap the rewards in my retirement years.
(Disclaimer: I am not an investment advisor. This is just my take on the market based on my personal experience. If you wish to make big money moves, please consult with a professional before doing so.)
Where Should I Put My Money Before the Stock Market Crashes?
If you think the market will continue to dive and you're scared about what might happen to your money, then where should you stash it?
What should you invest in if the stock market crashes?
- Should you invest in Bitcoin?
- Should you hold your money in cash?
- Or, maybe you should invest in gold or silver?
What's the right move for you?
Well...we've already seen Bitcoin tumble (from over $60k down below $20k), so that doesn't seem like a very solid safe-haven. With inflation running wild, cash is continually losing money (since you're losing purchasing power). Gold and silver might be okay, but they have historically been very poor long-term earners.
For myself and my family, we're continually investing money into the U.S. stock market for now. But, in the distant future, we may start to look at investing into other emerging countries. Perhaps in currency, perhaps in real estate, maybe even in business. I'm not certain what the investment will be yet, but it's certainly something to start looking into.
What's your take on all of this? Is there a stock market crash coming in your mind? What will you do with your money?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.