- Analysts are warning that a stock market crash is on the horizon.
- Today’s market conditions are similar to those in 1998 before a 45-day correction.
- Analysts at Vanguard say there’s a good chance the crash could come as early as 2020.
It’s been a bumper year for financial markets. But as a new decade moves swiftly into view, analysts are becoming understandably nervous about a potential stock market crash. The S&P 500 is up nearly 30 percent since the beginning of the year, and the Dow Jones has gained a shocking 20 percent over the past 12 months. 2019 is about to become the US stock market’s best year since 1997. But nothing lasts forever, and this decade-long bull market is almost certainly heading for a crash landing.
Stock Market Crash Warning Signs
According to Guggenheim Partners’ Chief Investment Officer Scott Minerd, the end of this glorious bull market is getting dangerously close. He says the Fed’s easy-money policies over the past year have helped pump markets full of liquidity. This has created an environment comparable to that of 1998, when a 45-day correction shaved nearly 20% off the S&P 500.
Minerd said the Fed’s policy has helped extend economic expansion but that a downturn is almost inevitable. The conditions in today’s market are eerily similar to 1998— inflated valuations, rising share prices, and speculative investors with an unhealthy appetite for risk. All of that is against a backdrop of low unemployment and increasing business confidence fueled by central banks’ quantitative easing.
Minerd isn’t the only one sounding alarm bells. Nobel Prize-winning economist Robert Shiller also warned that there were “bubbles everywhere” earlier this year.
Timing a Market Correction
Predicting the timing of the correction is more difficult. Minerd believes the spread between high-yield debt and safer options is one sign that a crash is coming. The fact that investors are increasingly willing to accept…