Crash Predicted
Henry Blodget published an article in Business Insider about a serious prediction from John Hussman (American philanthropist, economist, and mutual fund manager).
Blodget wrote “every historical indicator Hussman is looking at is suggesting that the stock market is wildly overvalued and headed for a period of lousy returns. How lousy? John Hussman thinks there’s a good chance the stock market will soon crash 40-50 percent……. And even if the market doesn’t crash, Hussman thinks stocks are priced to produce returns of only a couple of percentage points per year over the next decade…”
Pretty ominous. So what should you do?
Before you go out and…
- Dig a doomsday bunker in the back yard
- Raid the grocery store for canned goods
- Or even worse convert all your hard-earned money into useless gold bricks
………….know that this article was published in August 2013. The link is here.
So what has actually happened over the last 10 years?
- US Stock Market +11.5%/year (Dow Jones Industrial Average)
- Balanced Portfolio +7.4%/year (60% Dow Jones Industrial Average/40% US Aggregate Bond Index)
- Gold +0.5%/year (NY Mercantile Exchange Spot Price per Ounce)
Since 2013, the Dow Jones Industrial Average has moved up from 15,000 to about 33,000 today.
That means $100,000 invested in the Dow in 2013 would be worth more than $320,000 today.
And sure, over the last 10 years the US Stock Market has of course experienced a number of temporary down cycles. The worst one being a decline of -22.6% (Jan ’20 – March ’20). Never fun. For comparison, Gold’s worst one was a decline of -37.4% (Jan ’13 – Dec ’15).
But really………how useful was this prediction? I am sure some uninformed investors panicked after reading it in 2013, sold out their diversified portfolios, and permanently derailed their financial futures.
We get it. The news is constantly negative. Watch enough of it, and you can work yourself up into assuming the end is constantly near. Being an investor really tests a person’s patience. Heck, the Dow Jones Industrial Average reached its most recent all-time high near the end of 2021. That means most investors have spent almost 2 years patiently waiting to get back up to their all-time high. 2 years of patience…….that’s not easy.
Remember, there is always (always) an impossible-to-predict correction on the horizon. Stocks & balanced portfolios would not have been able to generate such large returns for decades upon decades if every once in a while they didn’t make investors really uncomfortable. Temporary down markets are the price of admission.
Be careful what you read or listen to. And as always, lean on our team when you need help.
Authors: Keith Wagner and Rick Wagner
Data source: FactSet
The views expressed herein are those of the author and do not necessarily reflect the views of Raymond James & Associates or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
The Dow Jones Industrial Average is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ.
An investment cannot be made directly in a market index.
The investments listed may not be suitable for all investors. Raymond James & Associates recommends that investors independently evaluate particular investments, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment will depend upon an investor's individual circumstances and objectives.
