Tag Archives: SPY

Will The Stock Market Crash In 2020?

Summary

  • The U.S. stock market is near its all-time high.
  • Since 1928, the market has delivered negative returns in 4 out of 23 presidential years. So, a 17% probability.
  • The stock market crashing or not has little to do with whether it’s a presidential year or not.
  • Coronavirus outbreak is triggering a correction in the market.

The U.S. market trades at an all-time high. It has been a bull market for almost 11 years, whereas historically, whenever the stock market has appreciated for 10 years or so, there will be a market crash like the one we had in 2008.

Yet, 2020 is a presidential year. Some people believe that the market will continue to head higher until after the election because Trump will do everything in his power to keep the market up since he’s going for the seat again. And the U.S. presidential election isn’t until November 3. So, the market could go up another nine months or so.

Historically, in presidential years since 1928, the S&P 500 delivered negative returns in 4 out of 23 presidential years (17%), including:

  • 1932, during the Great Depression, the market was down 8%,
  • 1940, during WWII, the market was down 10%,
  • 2000, the Internet bubble burst, the market was down 9%,
  • 2008, a financial crisis from subprime mortgages in the U.S., S&P 500 declined 37%
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Should You Change Your Investing Strategy in a High Stock Market?

The market is in its nine-year bull run. I’ll use the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and iShares S&P/TSX 60 Index Fund (TSX:XIU) as representations of the markets, respectively.

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SPY Total Return Pricedata by YCharts

The annualized market returns have been about 9.5% for the U.S. market and about 7% for the Canadian market.

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SPY Annualized All Time Total Returns (Monthly)data by YCharts

It’s not surprising that the U.S. market has outperformed the Canadian market in the long run because the U.S. market is much more diversified, while the Canadian market is usually weighed down by commodity stocks, including mining companies and oil and gas producers.

All this means is that investors need to be extra careful in picking the right prices to buy those companies or the Canadian market.

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