Market pulse: The approaching market crash
Did my headline get your attention? Good. That was my goal. Financial articles often have scary titles because bad news sells. Few would read an article titled, “Stocks will have an average year,” but it would be more accurate than the scary predictions.
Just last week I saw the headline, “A day of reckoning for energy company profits.” The article talked about how Shell and TotalEnergies’ made $5 billion each from April through June, which was down sharply from a year ago. But $5 billion of profits in three months hardly sounds like a day of reckoning. In fact, that is more than their average quarterly profit from 2013 to 2020.
Then there are headlines on financial websites. Here are some: “Faber: Can’t see another bull market in my lifetime” 1/27/16. “Economist Harry Dent predicts ‘once in a lifetime’ market crash, says Dow could plunge 17,000 points” 12/10/16. “Prepare for a ‘long and ugly’ recession, says Dr. Doom, the economist who predicted the 2008 crash.” 9/21/22. That crash didn’t arrive but his predictions continued: “Wall Street could be just 2 weeks away from a giant market crash, says ‘Dr. Doom,’ who predicted the 2008 crash.” 5/24/23. And there is this headline from last week: “A long-time market bear who called the 2000 and 2008 crashes warns the S&P 500 could plummet 64%, bursting a historic bubble.” 7/25/23
Are these headlines unnerving? Yes. Effective? Yes. Helpful? No.
And then there are scary names like the “Death Cross” chart pattern. That occurs when an index’s 50-day moving average crosses below its 200-day moving average. But results aren’t nearly as scary as the name implies. Since 1950 the S&P 500 Index has been virtually unchanged in the month following the appearance of a Death Cross pattern.
The financial news shows give helpful information, but most comments and opinions from strategists and analysts merely reflect and extend into the future what has already happened. The past year provides a good example. At the end of last year and into early 2023 the pros were overwhelmingly bearish. I wrote about that in several articles. But stocks rose and rose. Now the S&P is up 20 percent year-to-date. Most strategists and analysts are now turning bullish. NOW? Not helpful.
Beware the scary headlines, especially from those who are always bearish (called perma bears). Their goal is to get you to read an article and maybe pass it along to others who are unaware of the uniformly dismal track record. The headlines may be good for the financial media’s marketing, but not for you.
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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