Many investors on Wall Street have forgotten what a bear market is in stocks. The US stock market has been in one of the longest bull markets in history. Economist Ted Bauman feels that the US stock market may continue to rise, however, he feels that there are factors that could trigger a stock market crash. Mr. Bauman is an American citizen who moved to South Africa as a young adult. He earned both his economics and history degrees from the University of Cape Town. He is an expert in low-risk investment strategies and wealth preservation. He currently serves as an editor for Banyan Hill Publishing, where he provides three newsletters that have enabled his subscribers to make smart investment decisions. Ted Bauman feels US equities could crash. Therefore, he lists several scenarios of how the stock market could crash.
Ted Bauman feels that there could be a stock market crash similar to the famous Black Monday crash. This crash took place in 1987 and the stock market plunged almost twenty percent in a single day. Most of the investors panicked and sold their positions as quickly as possible. The stock market ended up bouncing back within a matter of weeks and ended the year higher. Investors who did not panic made money at the end of the year. This scenario is very likely today because of all the high-frequency traders and automatic trading rules-based system.
Another crash scenario that could occur is that everyone on Wall Street comes to the same conclusion about the US markets being overvalued and they all run for the exits simultaneously. Ted Bauman used the CAPE ratio to determine that the US stock market was extremely overvalued. The only other time the ratio had a higher reading was during the tech boom of the 1990s.
Ted Bauman advises individuals that a stock market crash is not a reason to panic and sell all one’s equity holdings. He feels that an individual should always hold an appropriate balance of both stocks and bonds. During a stock market crash, it is wise for an investor to have some cash on hand to purchase more shares at cheaper prices, but they should hold bonds to further protect an individuals portfolio during a stock market crash.
Ted Bauman’s Twitter