Are we due a depression?

vmf199

I've read that the S&P index and lots of markets have had a good 10 years, but usually there is some form of depression every 10 years...do you think we are due one? Is Brexit likely to affect things? I have some money to invest, but don't know if I would be better off holding onto it and investing when markets etc have potentially dropped.
Any thoughts ideas?
Thanks in advance

El_Torro

Yes, we're due a big market correction. People have been saying it's been due for at least the last 5 years though, so when it's actually going to hit is anyone's guess.

It's worth noting that we have had various small corrections over the last few years. At the end of 2018 for example the markets fell by about 10%, though they did recover quickly. A credit crunch style event will more likely cause stock markets to fall at least 40% and take years to recover though.

Brexit is unlikely to cause the correction, it's just not that significant on a global scale to have that kind of impact.

There are always reasons not to invest today. Though remember that time in the market is usually the most important factor in getting good returns, not timing the market.

If you have a significant amount of money to invest and you are nervous about investing it all now then one option would be to invest it in chunks, spaced out over some months. Remember though that this is more likely to reduce your eventual returns, not increase them.

Albermarle

Is Brexit likely to affect things?

Stock markets are global , although with an emphasis on what happens in the US .So Brexit is more of a local issue.

If Brexit goes badly , the Pound drops , which benefits most of the members of the FTSE 100 , so this index will go up .
Could be the smaller more UK focused firms in the FTSE 250 and those on AIM would be negatively. affected though.

Overall nobody knows if there will be a slide in global markets , from the current perceived high level However there are a lot of comments on this forum , where they are expecting the next 5/10 years not be as good for growth as the last 5/10 years.

A_T

Really big crashes don't happen that often. There was one in 2000 and again in 2008 but that doesn't mean we're due another one on a similar scale. Between the 1929 Wall Street crash and 2000 there was nothing quite the same.

Larry Swedroe said that more money is lost waiting for corrections than in them.

dunstonh

Market drops such as 2008 are more generational. However, financial crisis average once every 7 years. They are often regional and do not always impact on the global market much.

20-25% drops are a bit more frequent and 10-15% more so.

You always know these are coming but never know when. it is futile to keep waiting as when it occurs, you will then delay whilst it goes down. You will usually miss the bottom and wait too long and by the time you go in, you will have had lower returns than had you just invested beforehand.

Negative periods can often be slow over multiple years. 2018 was a negative year and statistcally, the odds of 2019 being a negative year are very low but it does happen from time to tim.

Linton

I do not believe we are "due" a general large fall in share prices as I do not believe that the market has a clock, especially now that it is global. One may happen at any time set off by major some event outside the boundaries of the market such as the .com boom/bust and the 2008 crash.

staffie1

Depressed market = opportunity to buy cheap.

Crabby

The FTSE 100 is about where it should be, if you believe yearly growth averages itself out, probably due to Brexit. The Dow on the other hand is steaming ahead and we all know what happens when an Index runs out of steam.

Wildsound

If you're diversified enough globally, then if your investments halve in value over say a 10 year period, then statistically, assuming everyone is just as diversified, their investments would have done the same, meaning they're in exactly the same boat as you.

Most people don't feel as bad if they know that everyone else suffers the same drop in the value of their investments. The worst feeling is doing something different that doesn't pay off and you're left with half your investment whilst everyone else has prospered. Of course, there will be niche investors who find themselves in the statistical minority, and they might lose all their money, or they end up being well off by a lucky decision.

A_T

Crabby wrote: »

The FTSE 100 is about where it should be, if you believe yearly growth averages itself out, probably due to Brexit. The Dow on the other hand is steaming ahead and we all know what happens when an Index runs out of steam.

The DJ is actually lower now than in January 2018.

The end of 2018 saw quite a drop - if we are due a correction that might have been it.

Joe_Bloggs

Whatever the state of the markets. All it takes is for Donald Trump to 'tweet' some personal commentary (AKA inner dialog sporadic nonsense outpourings) to send them plummeting or soaring.



J_B.