Will the Market Go Down Again

11 Min Read | October 6, 2021

For everyone who has been holding their breath while watching stocks in 2021—just hoping the carpeting won't be pulled out from under them—July 19 certain wasn't their day. That's when the stock marketplace took its biggest hit of the year, with the Dow Jones falling 2.1%, the Due south&P 500 dropping 1.6%, and the Nasdaq tumbling 1.1%.¹Look, it's expert to be in the know well-nigh what's going on, only at the end of the day, worrying will only cause impairment, not good.

Oh, and for the record—by the end of the week, the market place had recovered.ⁱⁱ

So, will we encounter the stock market crash during the rest of 2021? Let's take a await at some of the major factors (with a cool, level head) to meliorate understand where the market place is going.

What Is a Stock Market Crash?

A stock market crash is a sudden and big drop in the value of stocks, which causes investors to sell their shares quickly. When the value of stocks goes down, so does their price—and the end result is that people could lose a lot of the money they invested.

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To get an overall idea of the value of stocks, we wait at indexes (that'southward something that tracks how well stocks do) like the Dow Jones Industrial Average (DJIA), the S&P 500 and the Nasdaq. If you lot wait at a visual graph of one of these indexes, you tin can see why we use the termcrash. Information technology's similar watching a plane take a nose swoop.

Previous Stock Marketplace Crashes: Examples From History

Throughout history, the market has gone through a lot of farthermost ups and downs. When we look back, we're reminded that, yes, a market crash is a very difficult thing to go through, only it's something nosotros can and volition overcome.

The Great Depression,1929: Over the course of a few days, the DJIA dropped nigh 25%.³ It took a fiddling over a decade for the economy to get back to predepression levels. It was the manufacture from World War II that helped become things support and running.
The Stock Market Crash, 1987: The marketplace lost 22.6% of its value in ane twenty-four hours known as Black Monday.⁴ Only within 2 years, it had recovered everything it had lost.^five
September 11, 2001:Terrorist attacks in our state caused a major hit on the market, only it corrected itself super quick. Just one month later, the stock market had returned to September ten levels and kept going up throughout the finish of 2001.⁶
The Great Recession, 2008:The DJIA lost more than 50% of its value in a really brusk time.^seven Only after a couple of years, the market was stronger than e'er before—we were basically in a bull market (a period of large economic growth) from 2009 to just earlier the coronavirus crash.
The Coronavirus Crash, 2020: In March of 2020, the COVID-19 pandemic triggered the virtually rapid global crash in financial history. Still, the stock market recovered basis pretty quick, and the yr closed with tape highs.^viii

So, proceed your caput up. Chances are, you've already lived through ii major crashes and recessions. It's role of the rhythm of life!

What Causes a Stock Marketplace Crash?

A stock market place crash is caused by two things: a dramatic drop in stock prices and panic. Hither's how it works: Stocks are pocket-size shares of a company, and investors who buy them brand a profit when the value of their stock goes upward. The value and the toll of those stocks are based on how well investors believe the company will do. So, if they think the company they're invested in is headed for difficult times, they sell that stock in an attempt to get out before the value drops.

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

Let'southward walk through an case from the coronavirus pandemic that shows y'all but how powerful panic is. Equally news of the virus spread, grocery and convenience stores all across the earth sold out of toilet paper in a matter of days. Was there a toilet paper shortage? Well, yeah and no. In that location wasn't a shortage before people started panicking. But when people lost their minds and started stocking up on toilet paper, their actions created a shortage!

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

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

How Did the Coronavirus Crash Affect the Stock Market place?

Permit's pretend we've got a time car to accept us back to March of 2020 when the coronavirus was officially alleged a pandemic (don't worry, we won't stay long). While people were binge-watchingTiger Male monarch or swarming the supermarkets to buy toilet paper, the global economy was in anarchy. Supply chains ground to a halt. Entire industries shut downward overnight. And the stock market crashed—large time.

Back in the early on days of the pandemic, the stock market place took us all on a ride. Global markets (not only here in the U.Southward.) took a huge plunge, triggering a short-lived bear market (where the stock market falls by at least 20%) and an economical recession in the next few months. If you were checking your 401(g) during those days, you probably felt panicked as you watched your savings disappear.

But after the initial nose dive in March, the market started to inch its way dorsum to recovery. And past the time the New year's Eve ball dropped on December 31, 2020, the stock market place had regained all of its lost ground—and so some! Did you catch that? All of the major indexes grew in 2020:⁹

The Due south&P 500 gained 15.6%.
The Nasdaq gained 43.viii%.
The Dow Jones gained six.5%.

We withal have a road ahead of united states of america in 2021, but looking back, we tin come across that even the big, scary coronavirus crash didn't knock us out for long. In fact, economists are now saying the recession from the coronavirus crash was the shortest on record—but lasting two months!^x

Will the Stock Market Crash in 2021?

All right, let's but say it: Even though stocks took a tumble in July—for a 24-hour interval—that doesn't mean that "the big 1" is on the way. Let's get 1 thing direct:No 1 can perfectly predict whether or non the stock marketplace is going to crash during the rest of 2021. But recollect back to everything that happened last year—you can't make this stuff up!

And then, will the stock market crash in 2021? All nosotros can do is look at the things that will influence the market and your investments throughout the residual of the year. The good news is that major financial analysts predicted steady growth of the balderdash market in 2021.¹¹ But let's look at the specifics and where we are now.

Reasons to Feel Cautious Almost the Stock Market in 2021:

COVID-19: The coronavirus isn't going anywhere, and new strains similar the Delta variant are causing case numbers to go up.¹²
Unemployment: Although we've recovered millions of jobs since the land was hit hard in 2020, we're still experiencing huge unemployment numbers.¹³
Inflation: Those stimulus checks come at a cost. With more authorities 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 place in 2021:

Vaccinations: As more people became vaccinated for the coronavirus, the stock market responded in a positive style. We've already seen more than optimism, movement and spending. At that place'south a lot of pent-upward free energy in our country, and people are fix to go out and almost!
Old industries reopening: As the world continues to reopen, nosotros'll run into sure businesses gain value in their stocks again (call back oil, travel and amusement).
New industries growing: Specific industries—tech, e-commerce and biotech—gained tons of ground during the pandemic and will proceed to grow and requite investors reason to feel confident.¹⁴
Low involvement rates: The Federal Reserve has promised to keep interest rates most zero until at to the lowest degree 2023, which will encourage spending.¹⁵

We can run numbers and brand predictions all solar day long, but at the end of the 24-hour interval, we have no idea what'southward going to happen for the rest of 2021—no i does. So let's be the kind of people who are prepared for anything the future has in store.

What to Do During a Stock Market Crash

If the market does crash once again in 2021, remind yourself that y'all lived through another crash merely final year. In the heart of chaos, you lot've got to focus on what you lot can control: your mental attitude, your outlook and your actions. Of grade, a crash is scary. Yes, you lot'll have to make some changes. But with the right plan to move forwards, we tin and volition continue to brand progress. Here are five ways you can reply to a stock market crash:

i. Reject to panic.

Similar we said before, panic can make the crash just as bad every bit the bodily economic issues we're facing. Don't fall for it. Dealing with the unknown creates incertitude, and dubiousness left unchecked can become fear. Choose to stay clear and positive with your thoughts.

ii. Cut dorsum on everything.

You can't control how Congress makes their upkeep, just you tin can control howyous make your budget! If the economy goes under, it means it'south time to cut outall unnecessary spending ofany blazon. Cancel your gym membership, and don't fifty-fifty think about having an online shopping spree! Meal programme to salvage money. Use upwards the food that y'all accept in your pantry and freezer before you go out and buy more.

Focus on funding the Four Walls before anything else:

Food
Utilities
Shelter
Transportation

Protect yourself and your family. Tighten the budget and hang in there.

3. Follow the proven plan.

Rain or shine, the Baby Steps don't change. They're the proven plan for managing your coin, and they work! You need to understand which footstep you're on and then work the plan.

If you've lost your income: Focus on piling up equally much cash as you can. You can break paying extra toward debt right now. As much as that stinks, don't worry—it'south not forever. When the tough fourth dimension passes—and information technology volition—then you can start support and pay actress on your debt.

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

4. If you're investing, stay invested.

If you're on Baby Step 4, keep investing 15% of your income (unless you demand to pause for a while because you lot lost your income). Lots of people are tempted to cash out their 401(thou) or mutual funds when the market takes a nose dive before they "lose any more money." But if you lot pull out now, you lot'll guarantee a loss. Stay plugged in and ride it out to give your investments more time to grow and recover. Don't try to time the market. Focus ontime in the market.

five. Meet with an investment professional.

When in that location are big shifts in the market, schedule a call with your investment professional. You lot need specific communication for your situation—your historic period, your funds, the types of retirement accounts you take, and which Baby Stride y'all're on. Enquire your pro if you need to brand any changes because of the crash. Don't be afraid to share what's on your mind. If you're married, brand sure your spouse is on the telephone call! Make a program for how you'll move forrard together.

And past the way, if y'all'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've got to choose to exist patient and think long term here. No matter what the rest of 2021 has in store, remind yourself of the things you know to be true. Yous care well-nigh your family unit, your dreams and your future—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 can command. So hang tight, take it one day at a fourth dimension, 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 coin, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people accept used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, likewise as two syndicated radio shows and 10 podcasts, which take over 17 million weekly listeners. Larn More.