Are you planning for a stock market correction

dont_use_vistaprint

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Enzo_L

dont_use_vistaprint said:

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Pullback / Correction / Crash have specific meanings and @dunstonh has helped you by explaining their meaning.

These commonly understood meanings are relevant and useful, Describing what happens to markets needs specific meaningful terms so people can understand each other.

Pretending that a specific event which meets the definition of a crash isn't actually a crash is a blind alley.

dont_use_vistaprint

Enzo_L said:

dont_use_vistaprint said:

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Pullback / Correction / Crash have specific meanings and @dunstonh has helped you by explaining their meaning.

These commonly understood meanings are relevant and useful, Describing what happens to markets needs specific meaningful terms so people can understand each other.

Pretending that a specific event which meets the definition of a crash isn't actually a crash is a blind alley.

How are they useful ? Better to just say what it was , S&P lost money due to tariff fears , then got back to normal when Donald changed his mind 

Bostonerimus1

dont_use_vistaprint said:

Enzo_L said:

dont_use_vistaprint said:

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Pullback / Correction / Crash have specific meanings and @dunstonh has helped you by explaining their meaning.

These commonly understood meanings are relevant and useful, Describing what happens to markets needs specific meaningful terms so people can understand each other.

Pretending that a specific event which meets the definition of a crash isn't actually a crash is a blind alley.

How are they useful ? Better to just say what it was , S&P lost money due to tariff fears , then got back to normal when Donald changed his mind 

As with all language words are only useful when there is some mutual agreement about their meaning. The people who agree about the definitions of crash, correction etc can use them in discussions. The people who don't agree about the meanings can choose to be more explicit, but they might miss meaning in certain conversations where the terms are used.

Albermarle

LHW99 said:

And the chancellor now thinks S&S investing is such a sure bet it's obvious that people should be nudged to doing it via their ISA allowances.

What could possibly go wrong?

Although to be fair there is quite a lot of nudging in the same direction on these forums. Especially to people sitting on a lot of cash and new to investing.
So from the perspective that many people would be better off in the long term if they were a bit more adventurous with their personal finance, the Chancellor has probably made a sensible nudge.
Although if I was her I would be a bit nervous about the timing, with the markets maybe being a bit toppy for new investors piling in. ( although the effect of the ISA changes will probably be quite small in reality) 

phlebas192

Enzo_L said:

dont_use_vistaprint said:

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Pullback / Correction / Crash have specific meanings and @dunstonh has helped you by explaining their meaning.

These commonly understood meanings are relevant and useful, Describing what happens to markets needs specific meaningful terms so people can understand each other.

Pretending that a specific event which meets the definition of a crash isn't actually a crash is a blind alley.

The trouble is that there really isn't a specific definition of a "crash" and it does mean different things to different people. Dunstonh defined a crash as "being over 20%  (a correction being over 10% and a pullback being over 5%)" but that misses out what most people would likely consider a key element of a crash which is the velocity of the drop. 

As a counter example, who remembers the great crash of 2022? Probably no one because it wasn't a crash. Yet the S&P fell by considerably more overall than earlier this year and it took a full 2 years to reach a new high, far far worse than after Covid. By any objective measure, it was the worst market period since 2008. But it was a moderately prolonged bear market, not a crash.

April was a crash for the S&P not because it happened to fall by just over 20% (and only then if you measure the drop from intra-day high to intra-day low) but because it fell over 12% in just a few days. Arguably also because it forced an abrupt policy u-turn by Trump.

I don't think it helps anyone to get hung up on precise definitions for these events, especially since each of us is going to experience something different. eg when I look at the records for my actively managed portfolio, April 2024 was a minor blip on an end-of-month reporting basis (down 6.9% by end of March, 3.4% by end of April, new high by end of May) but its high in July 2021 wasn't exceeded until July 2024 and the low was a 32.7% fall in Sept 2022. So naturally I think of 2022 as far more serious than 2024. But by any reasonable definition it was not a crash!

boingy

I think the sky has been about to fall on the stock market for at least a couple of years now. If you ran for the safety of cash back then you'll have missed out a whole heap of gains. Make safe any money you'll need in the next couple of years and leave the rest to ride the rollercoaster.

dont_use_vistaprint

phlebas192 said:

Enzo_L said:

dont_use_vistaprint said:

dunstonh said:

This seemed  to be a specifically about Nvidia threat from China and Donald Trump playing around with tariffs ? Doing the usual bad guy followed by the Good Guy routine .... it was nothing like 22% on my portfolio more like 10%, While it  might fit your definition of a crash for being over 20%. It really was not one 

A stockmarket crash is defined as being over 20%  (a correction being over 10% and a pullback being over 5%).   The S&P500 fell by from peak to trough by 22%.  Global markets did not fall by as much and did not crash.

I think part of the issue is when people try to define markets and global financial systems in a mathematical/mechanical way like this, better  understand it's more of a social science.

Market corrections happen in all shapes and sizes and durations, . There's not just two boxes plus or   -20% 


 

Pullback / Correction / Crash have specific meanings and @dunstonh has helped you by explaining their meaning.

These commonly understood meanings are relevant and useful, Describing what happens to markets needs specific meaningful terms so people can understand each other.

Pretending that a specific event which meets the definition of a crash isn't actually a crash is a blind alley.

The trouble is that there really isn't a specific definition of a "crash" and it does mean different things to different people. Dunstonh defined a crash as "being over 20%  (a correction being over 10% and a pullback being over 5%)" but that misses out what most people would likely consider a key element of a crash which is the velocity of the drop. 

As a counter example, who remembers the great crash of 2022? Probably no one because it wasn't a crash. Yet the S&P fell by considerably more overall than earlier this year and it took a full 2 years to reach a new high, far far worse than after Covid. By any objective measure, it was the worst market period since 2008. But it was a moderately prolonged bear market, not a crash.

April was a crash for the S&P not because it happened to fall by just over 20% (and only then if you measure the drop from intra-day high to intra-day low) but because it fell over 12% in just a few days. Arguably also because it forced an abrupt policy u-turn by Trump.

I don't think it helps anyone to get hung up on precise definitions for these events, especially since each of us is going to experience something different. eg when I look at the records for my actively managed portfolio, April 2024 was a minor blip on an end-of-month reporting basis (down 6.9% by end of March, 3.4% by end of April, new high by end of May) but its high in July 2021 wasn't exceeded until July 2024 and the low was a 32.7% fall in Sept 2022. So naturally I think of 2022 as far more serious than 2024. But by any reasonable definition it was not a crash!

my understanding is that the regulators and the index providers themselves don't use such dramatic terms, they say what's happened more accurately using sensible language, it's more of an academic exercise to define the boundaries of a crash , correction etc so that they can publish interesting papers and sound clever

Alexland

phlebas192 said:

As a counter example, who remembers the great crash of 2022? Probably no one because it wasn't a crash.

I remember the great crash of 2022 and have been giving it a lot of consideration.

Bond markets, bigger than equity markets, crashed horribly in 2022 - possibly the biggest global crash ever and it has almost completely reset capital markets in ways that have not yet flowed into equity pricing.

If the risk free rate is now attractive then equity P/E ratios and yields seem likely to somehow return to normal to ensure people are still getting a good equity risk premium. This could be very bad for existing equity investors as it undermines the high prices they have been paying at the stock market in recent years. Let's hope that strong earnings growth saves the situation as its' probably only that expectation that's propping up such high valuations.

Heavy equity investors (myself included) probably didn't realise how vulnerable we have been for the past 3 years. Rather pleased with ourselves for backing the right horse which kept on running with enthusiastic momentum despite the zero interest rate supportive leg falling off during the race.

Some investors may not have even known about the bond crash other than noticing rising cash interest rates. Maybe if they didn't own any bonds they simply thought it was someone else's problem but if the strong stock market earnings growth doesn't come through then there probably will be an equites market crash with ratios returning to normal either way and a lot more people might start talking about the delayed impact from the great crash of 2022.

kempiejon

Alexland said:
Bond markets, bigger than equity markets, crashed horribly in 2022 - possibly the biggest global crash ever and it has almost completely reset capital markets in ways that have not yet have flowed into equity pricing.

Am I right, equity markets are smaller than bonds and commodities

boingy said:

I think the sky has been about to fall on the stock market for at least a couple of years now. If you ran for the safety of cash back then you'll have missed out a whole heap of gains. Make safe any money you'll need in the next couple of years and leave the rest to ride the rollercoaster.

That last line is a handy hint to hold on to.