Ignore the Siren Song of the Stock Market Bulls: Markets Will Crash

Stock market crashes are easy to see in hindsight, but they’re very difficult to see while they’re occurring. Too many people assume that a stock market crash will manifest itself as a Black Monday or Black Tuesday type of event, with a 10% or 20% loss in a single day. In reality, stock market crashes take far longer to occur.

During the last financial crisis stock markets peaked in October 2007, then began a slow decline through 2008 before major losses in late 2008 and even further losses in early 2009. The bottom of the market wasn’t reached until March 2009. That meant that it took 17 months for stock markets to go from peak to trough.

In early 2008 many investors were still hopeful about the prospects for 2008, even believing that stock markets could continue to post positive returns despite the “small drops” that kept occurring. They had seen numerous consecutive years of positive stock market growth, so they were completely unprepared to see the bottom fall out of markets.

While there are some similarities and some dissimilarities between now and then, by the end of this year one thing will have been certain: we are currently in the middle of another slow motion stock market crash. Investors who haven’t taken the steps to protect their assets and who fail to act soon will suffer the consequences of their inaction.

The Seeds for the Crash Were Sown Long Ago

Stock market crashes don’t just appear out of thin air. They are the result of monetary shenanigans that occurred years before. With central banks having created trillions of dollars worth of new money out of thin air to combat the financial crisis, financial markets became flush with cash. But with the uncertainty surrounding the economy it took years for investors to finally become more confident about getting back into stock markets. The memory of 50% losses took a long time to forget.

From 2016 to 2018 stock markets went on a tear, booking gains of well over 50% and setting all-time highs. After some initial weakness in the beginning of 2018 markets recovered towards the end of the year to set new highs in the fall, before having their worst quarter in decades to end the year. And now markets have had their best January in years, leaving the stock market bulls to proclaim that the worst is over. Don’t believe them.

The Worst Is Yet to Come

With the likelihood of increasing trade friction with China, the possibility of conflict in Venezuela, Europe slipping into recession, and a slowing of the US economy, 2019 is shaping up to be a bad year for the economy and for investors. While stock market bulls continue to pressure investors to “buy the dip” whenever stock markets drop, and tout every day in the green as evidence of a new rally, that’s just wishful thinking.

Wishful thinking won’t save your retirement accounts from losing value during a stock market crash, only sound investing will. Expecting stock markets to continue rising just because we’ve gone a decade without a crisis is a stereotypical example of expecting future results based on past results. Investors who stay in stock markets will lose their money just as surely as investors who look to protect their assets will save theirs.

With all the uncertainty surrounding the direction of the economy and of stock markets, more and more investors are getting back into gold. During the 2008 crisis gold gained 25% in value while stocks lost more than 50% of theirs. But once stock markets began to recover, many investors began to forget about gold, lured by the double digit returns that stock markets can see year after year in good times.

The savviest investors, however, have been getting back into gold, seeing that everything is lined up for gold to make major gains this year and next. With mine production flattening, demand rising, and the economy about to enter recession, 2019 will be the year for gold to really shine.

Thanks to gold IRAs, investing in gold is easier to do than ever. With a gold IRA investors can invest in gold and benefit from the protection it offers while still enjoying the same tax advantages as traditional IRAs. If you understand that stocks are going to lose value in 2019 and you understand why, then you know that the time to invest in gold is now. Don’t wait any longer to protect your hard-earned retirement savings from losing most of their value.