The Great Crash Cometh
The great crash is coming! Be on guard. Protect your assets. However, I don't know if it will happen next year or ten years from now – I have no clue, but it's the end of the year, and market predictions are running hot, so I wanted to give you my thoughts. A good forecast gives investors confidence, though no one knows what will happen.
The stock market experienced several crashes and corrections this past century, including the Tech Wreck, The GFC, Covid, and last year's rout. The steepest decline occurred during the Great Financial Crisis when stocks fell more than 50%, the worst correction since the Great Depression. The average decline in the S&P 500 since 2000 has been 13.96%. Despite all the pullbacks, it has gained more than 400%.
In 1990, my first full year in the investment business, a broker told me to buy silver because the great crash was imminent. I did not take his advice, thankfully. How did that trade work out? Since 1990, the S&P 500 has outperformed silver by a four-to-one margin. Silver, like gold, tends to rise when fear is high.
Corrections of 10% are normal and part of investing. In fact, the last one occurred in October, following a 7.25% drop in March. Regardless of this year's pullbacks, the S&P 500 is up 25.50%, erasing last year's losses. You missed stellar gains if you panicked during a "normal" correction, as the index is up 15.5% from the October low.
Few investors want to hear that stocks rise 75% of the time and have averaged an annual return of 10% for the past 97 years. Nor do they want a bland prediction like diversifying your assets and holding them forever. However, boring is good, especially when creating generational wealth. Buying and owning a diversified portfolio of low-cost investments is crucial to making money in the markets. Of course, you will experience painful periods on your journey, but don't abandon your plan because fruitful years follow barren ones.
Fear sells, so be on guard against false prophets because they do not know you, your goals, or your strategy. Rather than listening to talking heads, build a fortress investment portfolio and financial plan that can stand the test of time.
Happy New Year!
"The best way to measure your investing success is not by whether you're beating the market but by whether you've put in place a financial plan and a behavioral discipline that are likely to get you where you want to go." ~ Benjamin Graham
December 18, 2023
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.