When Will the Market Go Down Again

xi Min Read | October 6, 2021

For anybody who has been property their breath while watching stocks in 2021—just hoping the rug won't be pulled out from nether them—July 19 sure wasn't their day. That's when the stock market took its biggest hit of the yr, with the Dow Jones falling 2.one%, the S&P 500 dropping 1.half-dozen%, and the Nasdaq tumbling ane.1%.ⁱLook, it'due south good to be in the know about what's going on, but at the end of the solar day, worrying volition just crusade harm, not good.

Oh, and for the record—by the end of the calendar week, the marketplace had recovered.^two

So, will we see the stock market crash during the rest of 2021? Permit's accept a look at some of the major factors (with a cool, level head) to better understand where the market place is going.

What Is a Stock Market Crash?

A stock market crash is a sudden and large drib in the value of stocks, which causes investors to sell their shares quickly. When the value of stocks goes downward, so does their price—and the cease outcome is that people could lose a lot of the money they invested.

Arts and crafts a harder-working money plan with a trusted financial pro.

To get an overall thought of the value of stocks, we expect at indexes (that'southward something that tracks how well stocks practise) like the Dow Jones Industrial Average (DJIA), the Due south&P 500 and the Nasdaq. If y'all look at a visual graph of one of these indexes, yous can meet why nosotros use the termcrash. Information technology's like watching a plane take a nose dive.

Previous Stock Market Crashes: Examples From History

Throughout history, the market has gone through a lot of extreme ups and downs. When nosotros look dorsum, we're reminded that, yes, a market place crash is a very difficult thing to go through, but it's something we tin and will overcome.

The Swell Low,1929: Over the course of a few days, the DJIA dropped nearly 25%.ⁱⁱⁱ It took a little over a decade for the economy to get dorsum to predepression levels. It was the industry from Globe State of war Ii that helped get things back up and running.
The Stock Market Crash, 1987: The market lost 22.6% of its value in one twenty-four hours known every bit Black Monday.^four But within ii years, it had recovered everything it had lost.^v
September 11, 2001:Terrorist attacks in our country caused a major hit on the market, just it corrected itself super quick. Only i month later, the stock market had returned to September 10 levels and kept going up throughout the stop of 2001.⁶
The Smashing Recession, 2008:The DJIA lost more than than 50% of its value in a really curt time.⁷ Merely after a couple of years, the market place was stronger than e'er before—we were basically in a bull marketplace (a catamenia of large economical growth) from 2009 to merely before the coronavirus crash.
The Coronavirus Crash, 2020: In March of 2020, the COVID-19 pandemic triggered the near rapid global crash in fiscal history. Yet, the stock market recovered footing pretty quick, and the year closed with record highs.⁸

So, go along your head upwards. Chances are, yous've already lived through two major crashes and recessions. It'southward part of the rhythm of life!

What Causes a Stock Market Crash?

A stock market place crash is caused past two things: a dramatic driblet in stock prices and panic. Here'south how information technology works: Stocks are minor shares of a company, and investors who buy them make a profit when the value of their stock goes up. The value and the price of those stocks are based on how well investors believe the visitor will practise. So, if they call up the company they're invested in is headed for difficult times, they sell that stock in an endeavor to go out before the value drops.

The reality is, panic has simply as big of a function in a stock market crash as the bodily economic issues that cause it.

Let'south walk through an instance from the coronavirus pandemic that shows you lot just how powerful panic is. As news of the virus spread, grocery and convenience stores all across the earth sold out of toilet paper in a thing of days. Was at that place a toilet paper shortage? Well, yep and no. There wasn't a shortage before people started panicking. Just when people lost their minds and started stocking upward on toilet paper, their actions created a shortage!

The same kind of panic can trigger a stock market place crash. Once investors run across other investors selling off their stocks, they get pretty nervous. Then, stock values offset to dip, and more investors sell their shares. Next matter yous know, everyone is dumping their stocks, and the market is in a full-fledged crash. Expect out below!

Our point here is this: The stock market place's value is 100% based onperception andprediction of the time to come. No wonder it feels like such a roller coaster ride!

How Did the Coronavirus Crash Affect the Stock Market?

Let'due south pretend we've got a fourth dimension machine to take us back to March of 2020 when the coronavirus was officially declared a pandemic (don't worry, we won't stay long). While people were binge-watchingTiger King or swarming the supermarkets to purchase toilet paper, the global economy was in chaos. Supply chains ground to a halt. Unabridged industries close down overnight. And the stock market place crashed—large time.

Back in the early days of the pandemic, the stock market place took the states all on a ride. Global markets (non only here in the U.S.) took a huge plunge, triggering a curt-lived bear market place (where the stock market falls by at least 20%) and an economic recession in the next few months. If y'all were checking your 401(k) during those days, you lot probably felt panicked as you watched your savings disappear.

But afterward the initial nose dive in March, the market started to inch its way dorsum to recovery. And by the time the New year's Eve brawl dropped on December 31, 2020, the stock marketplace had regained all of its lost ground—and and then some! Did you grab that? All of the major indexes grew in 2020:^ix

The S&P 500 gained 15.6%.
The Nasdaq gained 43.8%.
The Dow Jones gained half dozen.5%.

We even so have a road ahead of us in 2021, but looking dorsum, we can meet that even the big, scary coronavirus crash didn't knock u.s.a. out for long. In fact, economists are now saying the recession from the coronavirus crash was the shortest on record—merely lasting ii months!¹⁰

Will the Stock Market place Crash in 2021?

All right, let'due south simply say it: Even though stocks took a tumble in July—for a day—that doesn't hateful that "the big one" is on the way. Let's get one thing direct:No one can perfectly predict whether or not the stock market is going to crash during the remainder of 2021. But think back to everything that happened final year—y'all can't make this stuff up!

And so, volition the stock market crash in 2021? All nosotros tin can exercise is look at the things that volition influence the marketplace and your investments throughout the residue of the year. The good news is that major financial analysts predicted steady growth of the bull market in 2021.¹¹ Just permit'south wait at the specifics and where we are now.

Reasons to Feel Cautious Well-nigh the Stock Market in 2021:

COVID-xix: The coronavirus isn't going anywhere, and new strains like the Delta variant are causing case numbers to go up.¹²
Unemployment: Although we've recovered millions of jobs since the country was hit difficult in 2020, nosotros're nevertheless experiencing huge unemployment numbers.¹³
Inflation: Those stimulus checks come at a cost. With more government spending, we've seen an increase in inflation, which has lead to investors pulling back and being cautious.

Reasons to Feel Optimistic About the Stock Market in 2021:

Vaccinations: Equally more than people became vaccinated for the coronavirus, the stock market place responded in a positive style. We've already seen more than optimism, movement and spending. There's a lot of pent-up free energy in our country, and people are ready to get out and almost!
One-time industries reopening: As the world continues to reopen, we'll see certain businesses gain value in their stocks again (recall oil, travel and entertainment).
New industries growing: Specific industries—tech, eastward-commerce and biotech—gained tons of ground during the pandemic and will continue to abound and give investors reason to experience confident.¹⁴
Low interest rates: The Federal Reserve has promised to proceed interest rates near nix until at to the lowest degree 2023, which will encourage spending.¹⁵

Nosotros can run numbers and make predictions all twenty-four hour period long, but at the cease of the solar day, we have no thought what's going to happen for the rest of 2021—no one does. And so let's exist the kind of people who are prepared for anything the future has in store.

What to Exercise During a Stock Market Crash

If the market does crash once more in 2021, remind yourself that yous lived through some other crash merely concluding year. In the heart of chaos, yous've got to focus on what yous can control: your mental attitude, your outlook and your actions. Of form, a crash is scary. Aye, you'll have to make some changes. But with the right plan to move forward, we tin and will go on to make progress. Here are five means yous tin answer to a stock market crash:

i. Pass up to panic.

Like we said before, panic tin can make the crash just as bad equally the actual economic issues nosotros're facing. Don't fall for it. Dealing with the unknown creates dubiousness, and doubt left unchecked can get fear. Choose to stay clear and positive with your thoughts.

2. Cutting back on everything.

Y'all tin't control how Congress makes their upkeep, but you can control howyou brand your budget! If the economy goes under, information technology means information technology's fourth dimension to cut outall unnecessary spending ofany blazon. Cancel your gym membership, and don't even think about having an online shopping spree! Meal plan to salve money. Use up the food that you accept in your pantry and freezer before you lot get out and buy more.

Focus on funding the Iv Walls before anything else:

Nutrient
Utilities
Shelter
Transportation

Protect yourself and your family. Tighten the budget and hang in at that place.

3. Follow the proven plan.

Rain or shine, the Baby Steps don't change. They're the proven plan for managing your money, and they work! You need to empathise which pace you're on and and so work the programme.

If you've lost your income: Focus on piling up as much cash equally yous can. Y'all tin pause paying extra toward debt right now. As much as that stinks, don't worry—it's not forever. When the tough time passes—and it volition—and then yous can starting time support and pay extra on your debt.

If your income is stable: Go on right on working the Baby Steps similar you were, and don't pause your debt snowball. Stay on the plan!

4. If you're investing, stay invested.

If y'all're on Baby Step 4, keep investing fifteen% of your income (unless you need to pause for a while considering you lot lost your income). Lots of people are tempted to cash out their 401(k) or mutual funds when the market place takes a olfactory organ dive before they "lose whatsoever more money." But if you pull out now, you lot'll guarantee a loss. Stay plugged in and ride information technology out to give your investments more fourth dimension to grow and recover. Don't attempt to fourth dimension the market. Focus onfourth dimension in the market.

5. Meet with an investment professional person.

When there are big shifts in the market, schedule a call with your investment professional. You need specific communication for your state of affairs—your age, your funds, the types of retirement accounts you have, and which Babe Step you're on. Enquire your pro if you need to make whatsoever changes because of the crash. Don't be agape to share what's on your mind. If you're married, brand sure your spouse is on the telephone call! Make a plan for how you lot'll move frontward together.

And by the way, if you lot've been playing the investment game without a pro in your corner—don't. Connect with an investment professional person in your surface area.

Stay Calm During a Stock Market Crash

You lot've got to cull to exist patient and think long term here. No matter what the remainder of 2021 has in store, remind yourself of the things you know to be true. You care nearly your family, your dreams and your time to come—so make your investment decisions with those things in mind. You'll do a much better job of that if you stay positive and focus on the factors that you tin control. So hang tight, take it ane day at a time, and we'll all get through the rest of this year together.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and raise their lives through personal development since 1992. Millions of people have used our fiscal communication through 22 books (including 12 national bestsellers) published by Ramsey Printing, besides as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More than.