Is The Market About To Crash?

Stocks took a tumble in July. Sure, it was only for a day but some believe that was the "shot across the bow." It doesn't mean that the big crash is coming. To be clear, there is nobody on the planet that can perfectly predict whether or not the stock market will crash in 2021. So much has happened in the past year that we could never have imagined.

The best way to consider whether the market is due for a significant drop is consider the things that could possibly influence the market over the coming months. Some analysts are bullish on the prospects and have projected that the market will steadily grow, albeit with more volatility, through the end of 2021.

Let's identify some positive indicators for the market in 2021:

First, there is the cyclical influence of pension dollars and contributions to pre-tax accounts and Roth IRA accounts before year end. The same thing typically happens with inflows in the first four months of the year.

Second, as more people became vaccinated for the coronavirus, the stock market showed positive signs of life. There is still pent up energy and dollars available to spend.

Third, there are some sections of industry that have grown incrementally during the pandemic. E-commerce, technology and biotech will likely continue to grow and give investors confidence.

Fourth, the reopening of certain business will gain value in their companies again. The travel and entertainment industries come to mind, along with oil companies and airlines.

Fifth, At their most recent meeting, the Fed confirmed that they would be keeping interest rates low (near zero) until at least 2023. This action typically encourages spending.

Now let's play devil's advocate.

Here are some reasons to be less optimistic about the prospects for the stock market as we close out 2021.

First, the full arrival of the Delta Variant of the COVID virus. Case numbers are going up. People can create their own ending to this story in their minds. Fear is not a driver of stock market inflows.

Second, Inflation. We are beginning to experience the price tag for the increased government spending created as a result of the pandemic. Inflationary numbers typically cause a cautious sentiment and could be cause for a pullback.

Third, the jobs reports are not optimal. On one hand, we have recovered millions of jobs since the height of the pandemic. On the other hand, we still have huge unemployment numbers. Some of this may be resolved in the fall when some current government programs expire.

The point is...

Though we don't have Nostradamus on our payroll, and we could make limitless predictions about the future, we have to be prepared for anything. The reality is the the market corrects regularly and if you are one of our clients, you have experienced three legitimate crashes in our lifetime.

If we do experience a market crash. There are some behaviors that will create a better outcome for you.

1. Keep your head about you. Panic is what creates a crash in the first place. It's a fool's errand. Don't be sucked in to the hype. Guard the door of your mind and be positive and clear in your understanding of the ebbs and flows of the market.

2. Evaluate your budget. Is there anything that could be eliminated or reduced? If not it's okay, see step one.

3. Stay invested. Timing the bottom is a matter of luck. you do not want to leave your future to chance. Don't guarantee losses. Be patient and wait for the sunnier days.

4. Meet with us. When there are big shifts in the market we need to be in contact. We should evaluate if any changes are necessary. Share what you are thinking so we can have the opportunity to collaborate on the right path forward, There are some constants that you'll want to hang on to. Your dreams for the future and the care of your loved ones need to be the focus. Meeting with your team affords you the opportunity to focus on the things that can be controlled. Whether adjustments need to be made or not, hang in there, we will get through this together!

*content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Stock investing includes risks, including fluctuating prices and loss of principal. Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries and companies.