A market crash is pending and could possibly be imminent. I am quite certain about this for reasons I will provide shortly. However, what I am not certain about is just how imminently (SOON) it might happen. This bull market could last another year or more, or it could abruptly end any day now. As they say in Wall Street parlance, they do not ring a bell at the top or bottom of a market. Nevertheless, whether you agree or not, I believe it would be hard to argue that the markets are not currently trading at extremely lofty levels. It is a factual statement that based on any historical precedent, stocks in the general sense (as measured by the S&P 500 for example) are quite expensive.
Here are the promised reasons why I am certain that a market crash and even a recession is coming. First and foremost, all bull markets end with a bear market and vice versa. The same can be said about stronger economies and weak economies. Nothing in economies or markets are permanent except perhaps that they cycle. The laws of supply and demand will eventually come into play and markets and economies will temporarily at least change from good to bad – and vice versa. And the cycle continues into perpetuity.
Additionally, logic and common sense dictates that the longer a good or a bad market runs, the closer it gets to the end. This has been a very long running bull market, especially if you are willing to overlook the Covid 19 flash crash. Covid 19 brought a “flash crash” where from January 1, 2020 through March 31, 2020 the market fell approximately 20%. Moreover, the market recovered back to its previous high by July 31, 2020 and has since gone on to all-time highs. Consequently, it can be argued that after bottoming during the Great Recession on March 27, 2009, the S&P 500 has been on a bull run for more than a decade notwithstanding the very short interruption brought on by the pandemic.
The following FAST Graph of the S&P 500 illustrates how overvalued the general market is. Additionally, it illustrates how short lived the Great Recession was relative to the subsequent bull market we have been enjoying now for more than a decade. It also shows how temporary the pandemic flash crash lasted and how strongly stocks have recovered since. As a long-term investor, I do not fear short-term corrections and recessions, instead, I exploit the long-term opportunity they bring.