There is a growing concern among financial analysts that the stock market has just about run its course. It has been one of the longest bull markets in stock market history. One economist, Ted Bauman, feels that the US stock market is going to crash very soon. Mr. Bauman earned his economics degree while living in South Africa. He spent twenty years of his career working in the nonprofit sector helping the less fortunate with housing needs. All of his experiences have led him to believe that society should do its part to help the less fortunate. He currently is an editor for Banyan Hill Publishing and has helped thousands of subscribers to make wise financial decisions.
Small and midsize companies are fading out from the #stockmarket, avoiding the volatility and scrutiny that comes with going public. The shift is leaving large corporations with overblown influence. https://t.co/gLKfgQXaHj
— Ted Bauman Guru (@TedBaumanGuru) November 28, 2018
One stock market crash scenario that Ted Bauman points out is where stocks would revert to the mean. He feels that the US stock market is more overvalued now than any other time in history, except for the dot.com bubble of the 1990s. The tool he used to measure the value of the overall stock market is the CAPE ratio. The current reading for the ratio is 32 and if stocks were to return to fair value the ratio would have to fall to a reading 17. There are many on Wall Street who feel that the stock market is extremely overvalued as well, however, they feel the bull market will continue for a little while longer and are complacent about overvaluation. It is only a matter of time before more traders come to the same conclusion and begin selling stocks all at once. This will cause the stock market to fall rapidly. To know more about him click here.
Another stock market crash scenario pointed out by Ted Bauman is the famous October 1987 crash. It was the largest one-day equities crash in US stocks in history. The majority of traders panicked and sold all their stocks as quickly as possible. This proved to be a big mistake because had they held their stocks until the end of the year, they would have made a ten percent rate of return. This same scenario could happen today with the stock market crashing suddenly and bouncing back even higher within a matter of weeks. Ted Bauman advisors investors never to panic during a stock market crash and never sell one’s entire stock portfolio at once.