stock market crash

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    What do you think about various articles that predict 2014 stock market crash?


    TS Paul

    Paul Farrell over at MarketWatch isn’t an idiot, although his consistently wrong monthly predictions regarding market crashes might make you think so. He and MarketWatch are laughing all the way to the bank because those are the headlines which attract eyeballs, and more eyeballs translates to more ad revenue.

    Those articles are almost all “link bait”, meaning they are written for the purpose of attracting attention, which leads to people linking to them from other articles, blogs, twitter, wherever. The end result is more traffic to the original article, which results in ad revenue, more followers, etc.

    I could easily set a single day record on this website for visitors, page views, ad revenue, and social shares if I shot out an update linking to a post in which I announced I believed a crash was imminent and I was changing my TSP allocation. (There are some other TSP websites which do pretty much just that every couple of months.)

    My prediction is that over the course of the rest of this year we will have two more corrections between 5% and 10%, and one correction between 10% and 15%. That’s not based on anything related to bubbles, the economy, geopolitics or Obamacare – it’s just that is roughly what happens in an average year. We can’t predict when they are going to happen, so we don’t bother trying and we ride through them without breaking a sweat because the market is almost always back to breakeven within two months (and sometimes within just a few days).

    Real crashes (30%+ declines) happen for very specific reasons, nearly always because the economy has entered a recession. That’s exactly why we look at all those economic indicators each month – so we can see a recession coming and be safely out of the stock funds when it hits. Right now, in my opinion none of the indicators are pointing in that direction so I think it is very unlikely we will see something like that this year.

    Thanks very much for the question and good luck out there. Please don’t let me have the last word on this – if anyone else has an opinion on this topic please share.

    The TSP Allocation Guide

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