Q&A – Stock Market Crash?
A reader wants to know: Is there a crash coming or is it safe to invest in the stock market now?
Q – I would like you to look into a crystal ball. The IMF just said that the risks to the global economy are significant yet everybody’s comment is positive about the TSX reaching new highs. I am just wondering if we are climbing again the proverbial “wall of worry” and getting a bit overexcited. It looks like there is a general feeling among investors, especially those that missed the boat in 2013, that you might miss the gains that accrued “to everybody else” if you do not plunge into investing now. This is a perfect scenario for a crash. Am I too cautious? – Claudia P.
A – I expect to see a stock market correction of 10 per cent+ at some point this year, followed by a rally. Despite the weak start to 2014, we have not experienced a correction of anything like that magnitude so far. The S&P 500 in New York was off only 0.7 per cent year-to-date as of the close on Feb. 21 while the S&P/TSX Composite was actually up 4.3 per cent, to many people’s surprise. Therefore, I advise caution about making stock purchases. The markets are overdue for a significant pullback. – G.P.
Do you have a money question you’d like to ask Gordon? Find out how to submit it here and then check out our Money section regularly to see if it was chosen for a response. Sorry, we cannot send personal answers.