A stock market crash is in the making by banks willing to loan mediocre companies as much cash as they need. But for how long? At some point, even bank’s reserves will run low. When companies no longer have a source to low interest rate financing, the six year stock bubble is going to crash, and it’s going to be loud.
Many companies will be in for a shock when their cash is taken away. They’ll have to learn fast to survive on their own, or they’re going to be declaring bankruptcy. After six year’s time, the stock market crash is coming. It’s just a matter of when.
Janet Yellen is the Federal Chair, and she announced this week that there are plans in the works to increase interest rates. Even a minute but gradual increase in interest rates can be enough to stall the stock market. It’s not currently known whether this will have a deleterious effect on borrowing businesses.
The last two times the stock bubble burst, it happened overnight. In both instances, the stock market collapse was devastating. When the tech bubble burst early in the millennium, the S&P 500—500 of the largest businesses on the NYSE and NASDAQ—lost 39% of their worth in only six month’s time.
Its happened before, and its going to happen again. Despite the warning, stock investors are in for a shock.
Can the Effects of a Stock Market Crash Be Lessened?
Since there is warning of an imminent stock market crash, it’s possible for investors to prepare.
Many of the stocks trading for high prices have an inner worth of very little money. It’s best to divest these funds before the stock bubble floats down.
Generally, stock markets rely on value investing, which has not been the case for the past six years. Usually quality companies are the ones who earn money, and not the floundering ones. But value investing can pay off over time. Even in the five year plan, a poorly performing stock may beat out their averages when measured over fifteen years. Companies that adopt a value investment strategy can take advantage of an actively managed fund.
Moving stocks from lofty ones to time-trusted ones can be a good plan. Gold has always been a wise investment choice, holding its own over the years. Yellen has stated that inflation will likely go in up the near future, which is one of the reasons why she wants to increase interest rates. Even during higher inflation, gold still holds its value.
Until the government decides to stop interfering with the market, there’s going to be widely fluctuating market swings. We can learn from past history by realizing that shortly after the bubble bursts, a stock market crash is just around the corner.
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