Will the Stock Market Crash in 2021?
I’ve noticed lately whenever the topic of investing comes up, people are weary to invest right now because they are waiting for “another crash like 2008”. I understand this fear. Nathan and I had only been saving for retirement for a few years when the economy took a nosedive. We lost over 50% of our retirement investment and were very discouraged.
A stock market crash is a sudden and significant drop in stock values, which causes investors to sell stock quickly. Throughout history there have been many ups and downs of the stock market. And while they suck to go through, we always get through them. The most memorable crashes are 1929, 1987, 2001 and 2008.
March of 2020 had a crash as well due to the economic recession worldwide due to the pandemic. However, by December 2020 it had regained all loss and gained some!
The S&P 500 gained 15.6%; The Nasdaq gained 43.7%; The Dow Jones gained 6.6%. This is why it is important to keep your money in the stock market and continue to purchase during the downturn.
No one can predict whether the stock market will crash in 2021, all we can do is look at indicators which influence the market and thus your investments. Overall, financial analysts are predicting steady growth...but that is their educated guess.
Reasons to feel Cautious:
#1: Covid 19. Sadly this virus isn’t going anywhere soon.
#2: Unemployment. Although jobs are coming back, there are still businesses that are gone forever and people still looking for jobs.
#3: Inflation. With the government giving away free money (stimulus and extra unemployment payments), this will cause inflation. This will cause investors to back off.
Reasons to feel Optimistic:
#1: Vaccinations. With more people getting vaccinated, hopefully the economy will reopen fully soon.
#2: Old Industries are reopening. Think travel and events...and this will cause their stock value to increase.
#3: New Industries growing. Tech and e-commerce grew considerably during this time and will continue to give investors confidence.
#4: Low interest rates. The Federal Reserve has promised to keep interest rates low, which will encourage spending.
Obviously we don’t know what the stock market will look like for 2021, but being invested in it is always a good bet. When you invest in good Stock Mutual Funds you are the tortoise, not the hare in the race. Keep your eye on the final goal and don’t get discouraged along the way.