When Do Stock Market Crashes Happen?
It shows why investors watch this metric so closely
It seems anytime we have a stock market pullback or correction, people start throwing around the word crash. We see the markets in turmoil graphics start to cover the TV screens.
The doom and gloomers come out in full force saying things like.
“Here we go.” and “I told you so.”
It’s almost seems like they’ve been rooting for it. I will never quite understand that.
They act like stock market crashes happen so frequently. But that simply isn’t the case.
So when and how often do they happen?
Stock market crashes usually happen during recessions.
Check out this great chart from Callie Cox that shows since 1950, 7 out of the past 10 stock crashes have happened during recessions.
Then let’s look back to 1929 to see just how many US stock market crashes there have actually been.
That much less crashes than we’re led to believe. If you listened to the gloom and doomers you’d think we had one every other year.
If crashes usually happen during recessions, where does the US sit in relation to recession probability right now?
Remember it wasn’t long ago that the consensus was that the US was essentially guaranteed to be in a recession. Well it never came. It was the most anticipated recession that never happened.
The market-implied probability of a US recession in the next 1 year is 33%. Goldman’s probability of a US recession within 1 year is 15%.
This shouldn’t come as a surprise. Recessions happen when the economy isn’t doing well. Right now the economy and consumers are thriving. There is record consumer spending, record low unemployment, wages are up, jobs are plentiful, inflation has come way down from its peak, and stocks are at all-time highs
These aren’t conditions that equal a recession.
You can ignore that fear mongering doom and gloomer that tries to convince you that another stock market crash is “sure” to happen any day now. Spend your time listening to someone else.
The Coffee Table ☕
I watched Jerry Seinfeld’s commencement speech that he recently gave at Duke University. Being a Seinfeld fan and seeing Jerry perform live, this was peak Jerry. Telling it the way it is but also providing laughter along the way. He has such a rare gift. I also had no idea he is 70! I recommend skipping the first few minutes and starting at about the 3 minute mark. You can watch the speech from that point here.
Here is the average annual cost of homeowners insurance by state. To my surprise the middle of the country has the highest costs by a wide margin.
Source: Liz Ann Sonders
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