Is it true that every 10-15 years the stock market crashes?

Question

I asked a question about my simple IRA and some girl answered the question, in her answer she said that the stock market crashes every 10-15 years, is this true?

I also am not asking for sarcastic answers...Im just asking a question, If you cant be nice then dont bother to answer.

Answer 1

The stock market runs on a 17-18 year cycle. The last bull cycle went from 1982-2000. Does the completion of a bull cycle lead to a crash? Not necessarily. For instance, the last bear cycle lasted from about 1965-1982, yet the market didn't "crash" per se. The market just traded sideways and never really went anywhere. The difference this time is this:

From 1850 to 1982, the market gained a total of 722 points, yet from 1982 to 2000, the market gained almost 11,000 points. In the prior bull phase, the market grew way too quickly. Spectacular run ups are usually followed by just as spectacular declines.

Consider also that there are several cycles that also top around now. There is a 25 year that when it completes leads to severe recessions or depressions. The most famous of the cycle completion was in 1929. Come to today and the cycle "completed" in about 2004. Interestingly enough, that cycle is one of several that top between 2004 thru about 2006/7. Does that mean we're in for a crash?

My personal opinion is Yes. Why? First, because of the extreme run up in stocks during the last phase that took stock valuations way about normal. Add to that the topping of several cycles around this current time (also, the Kondratiev long wave, which is about 50 years in length, turned down about 7 years ago), makes the likelyhood of a crash more probably in my opinion.

Alas, only time will tell, but if you do a study on cycle history, you will see that there is a huge correlation in market bull/bear phases to the cycle.

Before you discount cycles, in 1941 Edward R. Dewey created a composite chart of stock cycles out to 1958 and traded the markets based on the composite cycle. His win/loss ratio base on that composite cycle was an unheard of 185 to 1; basically a 99.5% accuracy rate.

Alas, with the prior super bull, the market has to workout all the excesses that were garnered during that time. The market should be moving through a steady, painful blood-letting, but it's not. The longer the market doesn't do that, the more severe the "crash" will be when it comes.

When the Dow finally finishes this bear cycle, I see the Dow trading in the 1,000 range. In 1929, the market lost 89% of it's value. When a bubble pops, the market will lose 90% to 100% of all the gains acquired in the previous run up. Also, Elliott Wave analysis points to this current super cycle putting the Dow down at 1,000. So, the Dow trading in the 1500 - 1800 range when this secular bear completes is highly probable.

Answer 2

The Government wouldn't have to tell you if the stock market crashes. It would be all over the paper. The two crashes of the 20th century (1929 and 1987) both happened in one day, when the Dow Jones averages lost over 25% of its value. After the stock market crash of 1987, the market instituted new policies so that if there is a big one day drop in prices, the market will shut down. This causes investors to slow down and assess the damage. Because of this new mechanism, there will never be a one day crash again. In the last five days, the market has lost about 6% of its value. This is substantial -- but hardly a crash. The value of the market is about the same as it was two months ago. There is no conspiracy theory here. The government does not really predict stock market crashes. The Fed tries to predict economic growth. A lot of people have been predicting a recession for the last year or two. It has not been kept secret. The country's economic problems have been public for some time. This includes the problems in the credit markets, high prices of gas and the huge government deficit run up by the Bush administration.

Answer 3

NO I don't believe it's true. There might be a certain stocks that crashes big time every decade or so but not the whole stock market, the last time it did was back in the 20's.

Answer 4

No it's not true.
Some of the mentionable ones

Panic of 1816
Panic of 1837 - May 10, 1837
Black Friday - September 24, 1869
Der Krach - May 9, 1873
Stock Market Crash of 1929, also called the Great Crash or the Wall Street Crash, leading to the Great Depression
Black Thursday - October 24, 1929
Black Monday - October 28, 1929
Black Tuesday - October 29, 1929
Black Monday - October 19, 1987
Asian financial crisis of 1997: crashes in Thailand, Hong Kong, South Korea, and elsewhere
October 27, 1997 mini-crash: The Asian financial crisis came to a head in this crash
Russian financial crisis, 1998
Dot-com bubble crash - March 2000

But I do agree what goes up must come down, the only thing that can follow record highs is record lows.

Answer 5

Yes and no. It does go down every once in a while because it can't go up forever. You would eventually run into a bubble environment.

The major crashes in history have been 2000, 1916, 1939, 1973, 1901, 1919, 1929, 1906, 1937, 1930. There were smaller ones in 1987 and so on. Not quite every 10-15 years but they do happen. The early 1900s kind of dominates when speculators ran wild and there were no regulations on trading.

The "problem" with trying to time a market crash is that you miss out on all the upside of being fully invested in the market. Your IRA is something that is long-term and you won't touch it for many many years, so it can weather the crashes over time. If you sit out hoping to miss the next crash, you also miss the 10% annual returns that the market gives. Ideally, you would have invested in 1988 and held on to 1999, but there's hindsight.

All that said, past performance isn't any guarantee of future returns, but there's a pretty good chance you'll do better than T-bonds if you have time on your side.

Answer 6

Define crashes.

Is it true that every 10 to 15 years the marketwill go through a severe downturn? yes.

It is laso true that every 10-15 years the market will go through a severe upturn.

Thats the nature of a cyclicality. It runs in cycles. It goes up for a while and then it goes down.

Now is it something that you can time? NO!!!

you cannot say, "well, its been 10 years, time for a downturn".

Remember, even though it does go down sometimes, overall the market goes up over time.

Any growing economy results in growth in the stock marketo ver time.

Answer 7

That depends on what you mean by crash. A correction yes.

Take heart - in the end, the stocks go up and they go up more than by the amount they came down. It is like going up the stairs. There may be temporary slack, (market correction) but in the end you reach the top.

From Andex chart, I can tell you this: If you have time on your side (that is, you are young with 30 to 40 years time horizon), you will see the market will only GO UP. This is shown by history. Simple arithmatic, numbers can't lie.

How can you protect your investments? Just stay in. Add more money to your portfolio periodically. New money will catch high and lows and in the end, you can expect, on a compounded basis, a return of close to 19%.

Again, this is a fact. I am not pulling this number out of the blue.
More money is made in stock market - long term - than any other investment. Again, this is a fact.

Answer 8

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Answer 9

The last biggest crash was 9/11
September 11, 2001.
I lost approximately 80% of my money in Roth IRA, and I was pissed-off because I could never regain that money back that I work so hard for.
The ERON crashes, where all of the employees loss all of their retirement funds through the IRA.
In the nineties, the largest crash was all of the dot.com corporation, my friends lost thousands of dollars in their IRA.
Any more questions???
I can guarantee you that in the stock market there is always going to be a crash, we just don't know when to be able to take our money out on-time.

Answer 10

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Answer 11

The stock market corrects itself continually, and sometimes in a major way. Check out the links below for a graph.

But, since 1929, this hasn't meant the destruction of the economy. Yes, many people gain and lose fortunes every day, but the general trend is about 12% growth per year, long-term.

If you'd like to feel a lot more comfortable about investments, I'd recommend Warren Buffet's letters to his shareholders (see below). He writes about a lot of core financial stuff in plain-english. Most people in high school or beyond should be able to appreciate his perspectives

Finally, I've found a pretty good, down-to-earth economist that's gets you grounded in these financial things.

The bottom line is that it's not that difficult to understand the world around us, and if you decide to gain an opinion on the economy, you'll be blessed for it.

Good luck,