Investors Fear the Looming Stock Crash!

Investors Fear the Looming Stock Crash! Many investors are fearful of the next market crash. When will it happen? How big will it be? Will my retirement savings be at stake? These concerns are certainly understandable, considering that the 2008 Financial Crisis is still visible in the rearview mirror. But, it turns out that investors are a lot more worried than they should be. If we define a stock market crash as a single-day event where the market precipitously falls, we find that these crashes are actually quite rare. Looking at declines in the magnitude of the October 1987 drop (-22.61%) or “Black Monday” in October 1929 (-12.82%), Yale researchers William N. Goetzmann and Robert J. Shiller along with Case Western Reserve’s Dasol Kim, found that there is a less than 1 percent probability of an extreme stock market collapse in any six-month period. More... ------------------------------------------------------------------ [Just Released: New Zacks Stock Market Outlook!]( Free to Mitch on the Market readers, this report provides the latest analysis of what to fear and what to cheer. • What are the chances of recession in Q1-18? • Which will be better, small-caps or large-caps? • Which 3 sectors are now "Very Attractive"? Which 2 are sinking? • What industry category is marked as today's very best? • And more. Be sure to check the forecasts in this 24-page briefing before investing another dollar in the market. [IT'S FREE. Read Zacks' Newly Revised Stock Market Outlook Now >>]( ------------------------------------------------------------------ With that in mind, the next statistic might surprise you… Since 1989, those researchers (Shiller in particular) have been tracking the judgments of individual and institutional investors on the probability of a severe market crash. In other words, over the past two-plus decades he’s been asking investors if they think a stock market crash is likely ahead. From all the data that he collected, he found that investors, on average, said there was a 19% chance of a one-day market crash in the next six months. This means that investors pegged the likelihood of a crash at 20 times the historical precedent. Investors are more fearful of a market crash than they should be. Are you that concerned too? Too Much Noise The researchers were curious where this additional concern/fear was coming from, and their argument here might not surprise you at all – they cited the negative influence of the news media on investor behavior. The researchers argue that journalists can “frame recent events through selective reporting – emphasizing negative outcomes.” Go figure. It’s no secret that excitement, negativity and scandal are what sell newspapers – not optimism. In the financial news community, it’s almost always about looking for the next shoe to drop. News reporting is more often about what is going wrong or what could go wrong, versus all of the factors that are going well. If you did not hear too much about the solid corporate earnings rebound at the tail end of last year, and how that is also playing a role in the stock market rally, then you see my point. Case in point: Shiller and company used Wall Street Journal articles to test their theory, measuring the influence of word choice and subject matter on investor expectations of a crash. They searched articles for negative terms like “crash” and “bad news,” and then they did the same for optimistic phrases like “boom” and “good news.” Their data confirmed what most would have suspected: “articles with “crash” and related terminology correlated with higher investor expectations of a stock market crash in the succeeding six months.” Bottom Line for Investors Avoid snap judgments and watch less financial news! Of course, I’m not advocating you receive less information. I’m just proposing you receive less bad information. And there is a lot of it out there. A daily diet of CNBC will make most investors want to duck, cringe, and rethink their entire portfolio strategy. But, most of the time we should be doing none of those things. As has been the case for most of the last eight years, many of the fearful headlines have not amounted to much. China’s hard landing? Forgotten. Europe’s sovereign debt crisis? Not as bad as many expected. Brexit? The markets rallied in the months after it. You can go on and on, and in each of those cases there was a slight hysteria in the financial news media, but the stock market found a way to keep climbing. I’d expect the same to be the case moving into 2018. You may ask where this expectation is coming from. To give you more insight into this forecast and much more, I invite you to [download our just-released Zacks Stock Market Outlook report free of charge.]( Be sure to check this 24-page briefing for U.S. and global opportunities and risks. It's filled with stats and facts that back our latest forecasts. Additionally, this Special Report shows what may be the single greatest threat to the U.S. economy. It also reveals where we predict the S&P 500 will be in the months ahead, current odds for recession in Q1-18, GDP growth, employment, long-term interest rates, and much more. [Today It's FREE: Download Zacks' Latest Stock Market Outlook Report >>]( ------------------------------------------------------------------ ABOUT ZACKS INVESTMENT MANAGEMENT If you want some ideas on just how position your portfolios accordingly, reach out to us here at Zacks Investment Management and we’ll show you how. Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. We use this independent research and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. WANT TO LEARN MORE ABOUT ZACKS INVESTMENT MANAGEMENT? Here are three ways to get started: 1. 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