Question

I was wondering if I should be concerned about the stock market crashing again in the next three years.

Do you think we're at a stable point in U.S. history, or will we struggle again?

Answer 1

Just about every day, financial headlines warn that the latest massive run-up of the stock market is on shaky ground and that the market is headed for a crash. These warnings don’t usually make it to page one, but they should alarm anyone who has a substantial amount of personal wealth in stocks. Many people are asking will the stock market crash in three years ... The next recession will probably cause a slight stock market crash, but I don't think we will have a 50% drop or something like that. Probably more of a modest 15-30% decline. It is possible we don't have a recession in 2020, but it isn't looking very likely.

I don’t think we are at stable point any of these seven other factors could trigger the next market crash

Interest-rate tinkering -- The Federal Reserve has been raising interest rates in response to increasing inflation. As risk-taking and leveraging have exploded, the risk is increasing that an interest-rate hike could trigger a domino effect, driving down the value of stocks and commodities.

Certifiably crazy world leaders -- The threats posed by countries like North Korea and Iran are very real and very unpredictable. Heightened political risks around the globe increase economic risks, according to studies by Rand Corporation and the World Economic Forum.

Cyber-attacks and disruptions to the power grid -- Attacks by countries like China, North Korea, Russia and Iran are becoming more common. Major companies and governments have already fallen victim. Threats to our economy only grow as the attacks become more sophisticated, and as we become more and more dependent on technology, Director of National Intelligence Daniel R. Coats said in his recent Worldwide Threat Assessment.

Emerging markets in distress or chaos -- Countries from Turkey to Argentina and South Africa are experiencing market and currency plunges, along with interest rate and recession woes, which could spread to other countries.

China could crack -- China has begun feeling the effects of tariffs, a trade war and a rising dollar. But a real-estate crash or defaults by local government-owned financing vehicles could be the breaking point and would impact our economy.

Trump might be impeached – Although our president would likely stay in office, the confidence in the bull market that shot up when Trump was elected could be undermined.

Perils of a too-tight labour market -- An incredibly tight labour market already has resulted in something as crucial as 911 emergency call centers not being able to get enough people to answer the phones. Prisons, meanwhile, are training inmates to be coders. What could possibly go wrong?

Bottom line: The current bull market isn’t going to last forever.

The danger is only compounded by investors’ tendency to not see the writing on the wall until it’s too late.