Sunday , 21 July 2024

Another 35% Crash In the Stock Market Would Not Be That Unusual – Here’s Why

Some witless pollyannas will say the title of this article is inappropriate. stockcrashimages-1Unfortunately, these hapless souls suffer from excessive greed, rampant euphoria and hyper-complacency. Furthermore, they are ignorant of stock market history and its immutable cycles where only magnitude and duration vary. They foolishly delude themselves into believing that the US Fed has “banned” bear markets and has discovered the “magic elixir” to kill all potential bears while they are still cubs or in hibernation.

The above introductory comments are edited excerpts from an article by Vronsky ( entitled Stock Market Crash Forecast…7 + 7 + 7.

Vronsky goes on to say in further edited excerpts:

As stock market sage Adam Hamilton knowledgeably observes:

“Stock markets are forever cyclical. Stock prices don’t move in straight lines forever, they endlessly rise and fall. Great cyclical bulls that earn investors fortunes are followed by brutal cyclical bears that create the best opportunities to buy low again.

The serious risk historically is that market sell-offs tend to be proportional to the rallies that led into them. The longer stock markets climb without a major sell-off to re-balance sentiment, the more unbalanced trader psychology becomes to the greed side. This necessitates commensurately larger and/or sharper sell-offs to bleed off the excess euphoria and bring sentiment back into line.  That means we are in for a doozy of one today!”

How far might stocks be beaten down in the next bear market? 

Well no one knows for sure. However, historical data may provide lines of probability.

Source:   History Of U.S. Bear & Bull Markets Since 1929

Since 1929 there have been 25 bear market in US stocks, where the average loss was -35% over an average duration of 10 months. Therefore, if we project the historic bear market average to the present emerging bear market, we might see the S&P500 Stock Index fall to about 1300 — and the corresponding Dow Index might find bottom at about 11300. Moreover, the average duration suggests the bear market might find bottom in the second half of 2015. Prudent investors must be aware, however, that maximum bear market loss was in 1932, when stocks plummeted -62% in less than 7-months!!

Prudent and smart investors will hope for the BEST, but will prepare for the WORST.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.


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