2017 has been a year of gains thus far, but the major worry is when is the stock market going to crash?
The next stock market crash prediction is rather important at this juncture because almost 80% of global market analysts and experts believe that a stock market crash is in the offing.
What’s particularly worrying is this prediction is not based on any astrological combination of stars.
On the contrary, the next crash prediction is backed by strong empirical evidence.
Whether you follow the technical analysis of the market or fundamental study, the next stock market crash prediction almost seems to be written on the walls.
Often a popular belief in market parlance mentions that every time the central banks are printing as much as they are right now, a stock market crash is sure awaiting at the corner.
Just like the market gains are an established fact, it is pretty much known; soft landings and extreme debt do not live together.
So then the question is, do we have a timeline for the next crash?
Is the stock market going to crash before the end of the year?
Well, technical charts and fundamental analysis both seem to point towards this ominous eventuality.
We decided to collate the views of some of the best-known market faces who are predicting a stock market crash soon.
To keep the discussion as close to facts as possible, we will consider only those arguments that are backed by facts and can be corroborated with appropriate evidence in support of their claims.
It is also important to understand how they are arriving at this conclusion.
The Next Stock Market Crash Prediction by the Most Famous Stock Trading and Investment References
So, here is how the most famous stock traders and investment references predict the next stock market crash:
1. Sandy Jadeja of Core Spreads
Jadeja points out that most of the technical analysis of the market uses historical charts to identify trade patterns.
While technical analysis cannot give you details about the triggers of a stock market crash, it can surely identify the timeline when the next event is expected.
As per those charts, Jadeja mentioned, the worst is yet to come.
The period from 2011 to 2018 almost mirrors the chart pattern seen during the great depression from 1928 to 1934.
He terms this as a dangerous time zone that is mirroring a Time Cycle.
In this case, it is an 84-year time cycle.
Therefore, We Cannot Undermine the Potential Threat to the Economy.
According to the time cycle, the economy is likely to see as turbulent times as the United States faced during the great depression.
Bouts of sharp declines are expected to take shareholders and investors by surprise.
This coupled with the panic factor is likely to bring in the stock market crash.
According to the charts that Sandy Jadeja is following 2017-end and 2018, in particular, seem to be troublesome.
The investor reaction in response to sudden decline is expected to wreak maximum havoc.
However, the good news is this advance information can help you prepare better for this adversity.
This will allow you to turn it into an opportunity that can help you earn more profit.
Therefore, intelligent investors need to use this information and prepare for a possible stock market crash in a way that they can derive some advantage from that situation.
You can use market data to better predict price targets and then also incorporate stop losses.
In this way, you can both maximize your profit and limit the losses that you might have to incur.
2. Nouriel Roubini
The prediction about next crash is also on Dr. Doom’s list of observations.
Yes, I mean Nouriel Roubini, the man who predicted the 2008 financial market crash so precisely.
So when is the stock market going to crash next?
Roubini says 2017 is fraught with possibilities.
He believes that a financial storm is brewing and can make a landfall anytime this year.
Roubini does not specify any particular sector or trigger that can bring upon the next stock market crash.
However, he does raise concerns about geopolitical risks to the economy.
Potential policy-related risks for the stock market also cannot be ruled out completely.
Roubini specifies that Trump’s policies pose one of the greatest risks and could well trigger the stock market crash.
He feels Trump’s policies have essentially left the market is a tizzy.
It isn’t clear which side is better or for worse.
But overall, the expectation is that of a sustained risk on the global platform.
You have to understand that the economic policies undertaken by the United States have implications on a global forum.
It is, after all, the biggest economy and the policy actions that Trump takes from here on is keeping the global markets on their toes.
Roubini has also discounted the over dependence on the volatility element.
He says that investors should not read too much into the current calm in the market.
Investors must remain aware of the implications of the variety of policy matters that could turn the table in the stock market.
If the 2008 subprime crisis is any hint, economic problems comprise of the biggest uncertainty in the stock markets.
3. Global Consensus
Moreover, you have to understand that Roubini or Jadeja are not alone.
You have a whole host of international market experts crying hoarse about the possibility of a stock market crash.
Founder and fund manager of one of the world’s largest hedge Funds, Ray Dalio of Bridgewater too sounds warning signals.
He says the next stock market crash prediction could be even a bigger issue than mere monetary or fiscal crisis.
Dalio like Roubini too has a long track record of coming up with accurate market prediction.
So, ignoring them is hardly an option, and the reasons that they are citing are pretty plausible.
But even if you choose to ignore them, there is one market voice that you cannot possibly ignore.
When the Oracle speaks, the world listens in complete silence.
Yes, the world’s third richest man and billionaire investment guru, Warren Buffett too is worried about the stock market crash.
But more than policy matters, he is worried about valuation.
His prediction about the next major slump in the world markets is based on the fact that many stocks are overvalued at the moment.
Buffett’s concerns are based on the irrational exuberance seen in many of the stock counters at the moment.
This essentially means that the stocks are trading many times above their fair value and the stock’s fundamentals do not support the prices that these stocks are quoting at the moment.
He warns investors that this is not the right time to buy stocks.
He feels that the boldness shown by investors at the moment is bordering on irresponsibility.
Warren Buffett, one of the greatest living legends of stock market investment and trading acumen, says even a 70% stock market crash could be on the cards.
But Buffett’s viewpoint with regards to a stock market crash is little different from the many seasoned veterans in the market.
Often considered as one of the most optimistic investors in the world, he considers every single stock market crash is a great buying opportunity.
Often it is these well-timed buys that have helped him generate the billions that he is famous for.
Buffett’s unique philosophy for investing in stock markets is all about banking on the fear factor.
Fear in the face of adversity is what will deal the body blow in the next stock market crash.
People often commit rather rash mistakes gripped by fear, and that is the opportunity Buffett wants to capitalize on.
This is exactly why he is discouraging any stock buy at the moment.
He feels that valuations are stretched way over their regular and fair value levels.
There is an urgent need to wait for the right time when stock prices are set to fall.
He feels the market meltdown is the perfect opportunity for huge cash deployment in the market and Berkshire Hathaway is prepared for it.
In fact, they started 2017 with estimated $85 billion-plus cash levels that can be deployed any time the markets nosedive to extremely inexpensive levels.
He feels that keeping cash handy for such opportunities is important and at the current moment, the opportunity could present itself anytime.
So overall, Buffett is keeping his armory ready for the market crash that almost seems imminent.
When one of the biggest and decidedly an influential market player is preparing for it, you cannot ignore it.
5. Role of the VIX Factor in Stock Market Crash
Often in response to the question, is the stock market going to crash, many market observers have cited the VIX levels to project all is well.
Why are major players like Roubini looking at it more of calm before the storm?
The valuation- volatility conundrum is a serious concern. In many ways, it is this factor that brings in serious variation in trade policies.
Currently, the Volatility Index is close to levels that were last seen in 2007.
The Volatility Index or the VIX is considered a gauge of fear in the market.
Established by the Chicago Board Options Exchange, the VIX is the average volatilities experienced by the S&P 500 options.
So, it is possible that the relative fear quotient in the market is low, but that in no way establishes the fact that the next stock market crash prediction is inaccurate.
If anything there is further corroboration of the same.
So if you ask me, I would read the VIX more as a situation where the investors are least scared of the stock market crash since 2007.
But it does not obliterate the possibilities and prediction of a stock market crash in a meaningful manner.
In fact, if you pay a bit closer attention to the VIX pattern, you would see that it has exceeded the 40 mark only 5 ties from 1990 to 2015.
Every time it has breached that sacrosanct level, the markets have seen the unprecedented downward spiral whether you consider the 1998 Russian stock market crash or the 59 mark ahead of the 2008 subprime crisis.
So, What’s Different This Time?
Probably the sense that seems to be coming through is that the stock market players are not worried about the inevitable crash that is likely.
Rather than feeling relieved, it is a matter of great concern for the markets.
It is because in the initial phase of a crash, the impact is fairly limited.
The broader public gets a taste of it much later.
So even when the VIX indicated potential fear quotient in 2007, it wasn’t until middle of 2008 that the general public started feeling the heat of the actual mayhem.
So as the experts would put it, it is better to look at this calm as one before a storm.
Are Investors Wearing Blinders?
Would you then feel that most of these investors are ignoring the most obvious market signs?
Just too many investors seem to be missing the most obvious market signs.
This is exactly why inflation appears to be almost non-existent, and the stock market bubble seems to be inflating gradually.
Nobody is paying attention as of now, and it is increasing on its own accord.
But even if you did not pay attention to the stock market dealings, it is impossible to ignore the political and the economic scenario at the moment.
Risks seem to be emerging from every corner.
If you look at the economic outlook for the United States, 2017 seems to scream risk from every corner.
When Donald Trump took over, the market was worried about a different kind of economic risk.
They expected Trump to avoid all international issues.
While that might not have happened, but you cannot rest in peace either.
Look at the Economic Policy That Trump Is Following.
It is anything but appropriate.
The economic outlook for the United States remains as worrying as ever.
That is exactly why the prospect of a stock market crash has not abetted at all.
Let’s try and explore why the Indices were rallying.
It was mostly because of the tax cuts that Donald Trump promised.
He intends to cut down corporate and personal income taxes to 15% from 35% at the moment.
However, there is no clear roadmap on how he plans to achieve this.
Neither is there a proper analysis of the various outcome of the potential tax cut.
That, in itself, seems to be a sufficient trigger for next stock market crash prediction.
That apart, if you look around, there are some political concerns globally as well.
Brexit, the eco-political outlook for Europe, the state of affairs in the Middle East all seem to be screaming out warning signals loud and clear.
In this context, the rally that is being seen in the markets seems almost out of place.
The stock market crash seems to be an inevitability that investors are living in the oblivion of.
There is also the risk of Europe toeing the populist line after Trump initiating for the United States.
The Euro-Dollar Conflict: Potential Trigger for Stock Market Crash
Even at the height of the 2008 crisis, something unique about the global turn of events that it was all synchronized.
But now that is changing. Suddenly America and Europe are no longer moving in parallel lines.
There is now every probability that they might collide.
There is absolutely no parity between the dollar and the euro.
On the contrary, the euro has gained ground.
The euro and the dollar are surprisingly moving in different direction.
This is mostly on the back of the political developments that we have been seeing across Europe.
Pro-EU parties have been sealing victory across entire Europe, and that has led to a fair bit of positive sentiment taking over the average market-related triggers.
This fact alone should have triggered a rise in the Volatility Index.
The Dollar is trading below its expected levels.
Though the trigger for this news was that Trump would reduce the globalization impact on US markets, the reality is quite different.
The US Economy is dependent on the variety of exports more than even.
The dollar did fall off somewhat in the initial phase soon after Trump took over and that increased the export profit even further.
However, Trump has been continuously threatening about import tariffs.
Though he has not clearly identified a timeline for it, there is a lot of uncertainty as a result of the news.
What is surprising is the VIX is not responding to any of these threats, and that has created more room for concern.
Perhaps this is why Nouriel Roubini constantly mentions the risk of a global policy decision triggering the stock market crash.
The Wave of Contradiction: A Major Worry
If you are not convinced about the next stock market crash prediction on any of the above-mentioned points, there is something that might.
Investment guru Marc Faber has called for 40% free fall in markets.
He expects the indices to nosedive and sees the S&P 500 breaching below 1500 mark.
Now that is a rather intimidating call on the next crash.
It might set you to wonder how he is basing his bearish call.
He feels that the sudden upmove in Facebook, Apple, Netflix & Google is one of the most bearish signals that the markets could have got.
Only a few stocks are driving the current rally in the market, and that does not augur too well from the valuation perspective.
Technicals at the current juncture too seem absolutely stretched.
Faber goes on to add that the imbalance in wealth distribution, the limited trigger that is taking the Indices forward is all pointing towards trouble going forward.
He feels that either there will be a severe taxation drive or the economy is bracing for a renewed bout of massive deflation.
We cannot deny the wave of contradiction in financial markets around us.
On the one hand, you have corporates reporting profit and technology stocks amassing wealth.
However, the average middle-class worker on the street is not benefitting in any significant manner from this move.
That clearly points towards a massive inequality in wealth distribution.
In the words of many experienced market men, this is the basis of prediction for the next crash.
Thus far, we have seen Wall Street and Washington work in sync with each other, and that in many ways, helped the US maintain its leadership position.
Do We See That Coordination Coming off Finally?
Are we at risk of a major global calamity as the US Policy and financial markets venture in opposite direction?
The worry is, what will happen when the VIX finally comes to terms with reality?
Is the stock market going to crash at that juncture?
Many times, Faber’s correction calls have come under the critic’s scanner.
But he remains rather unfazed with the current call.
He feels that the Central banks could print enough money for the Dow to go and hit the 10,000 mark but that alone won’t solve the problem.
It is a rather piecemeal approach to the entire problem.
At some point of time, the whole all of this would crumble like a pack of cards, and that would not be a happy time in the future of financial markets.
What’s also worrying is that Faber is not alone in this call for correction.
Almost every investment expert has questioned the valuation stretch.
Every big brokerage and research analyst maintains that prices are trading at a significant premium to their fair price levels.
The muted VIX is also seen as an outcome of the so-called delinking between Washington policies and Wall Street performance.
That, in itself, is also a huge matter of worry.
How will the country put up a united front if the financial market and government policies are not aligned appropriately?
So, is the stock market going to crash as this divide becomes wider?
So, How Do We Predict the Next Stock Market Crash?
Therefore, if you are curious about the next stock market crash prediction, the fact is you need to be more cautious about the stock market movement going forward.
Don’t be too swayed by the so-called muted VIX.
Caution is the name of the game in global markets at the moment.
Chasing momentum is not the best policy at the moment.
Look for fundamentals and how they can materially impact the probability of profit is what needs to be probed.
Listen to market experts at the moment.
The stock market crash, most feel would be driven by the imbalance between policy movement and the lack of financial mettle in them.
Technology stocks are leading the momentum currently.
However, according to the next stock market crash prediction, get set for a bigger technology bust.
If you have been through the dot com burst, experts say this is going to be many times bigger than that.
A close study of the stock market crash in the past 2-3 decades would indicate that the technology and financial stocks have been the biggest troublemakers.
Now at any point of time, if these stocks pull back, the market could see a certain break in momentum resulting in serious losses.
When you compare the current euphoria in the market to the 2007 phase, just before the financial crisis set, the similarities could send you into a tizzy.
So Are We Sitting on a Time Bomb in the Market?
Is it only a matter of the time before the stocks come crumbling down like a pack of cards?
So perhaps, it is the reason that we must deal with the inevitability like Buffett mentioned.
Instead of timing the crash correctly, let’s keep our armory in place when the next stock market crash happens in reality.
Cash is king at the moment, and as Buffett says, this is not the time to make the new allocation.
This is the time for the smart investors to make knowledge their ultimate power.
Most seasoned experts say that the valuations at the moment are very stretched.
Therefore, it makes sense to avoid buying stocks at the moment.
Instead, when the next stock market crash prediction comes through, you can use it to make a fresh investment.
The trick about dealing with a stock market crash is never about limiting losses.
As Buffett always maintains, rising markets are one of the biggest certainties of life.
Be it the dot com bust or the subprime crisis; the markets have come up stronger and higher every time after a fall.
Patience and caution, therefore, are your best friends.
It is always better to err on the side of caution as you prepare for the stock market crash.