The performance of the stock market is measured in terms of the points of the benchmark indexes. One of the most popular indexes is the Dow Jones Industrial Average, also known as DJIA. It tracks the performance of the top 30 companies in the United States that conducts trade on the NASDAQ and NYSE (New York Stock Exchange).
In recent years, the best apps to buy stocks has witnessed an extensively long bull market. The extension meant that the market was due for a correction in the near future. Now, the US stock market is trending at an all-time high. However, the real question is – Is this the right time to celebrate?
The Dow Jones Industrial Average hit a new high record of 28,038.65 on 18th November 2019. However, instead of celebrating, now is the time to get ready for the inevitable correction or crash.
The dramatic rise and fall of the US stock market over the years
There have been numerous highs and lows of the US stock market in the last few years. For instance, the stock market crash of 2008 was different from the previous ones. The massive downfall of more than 50% stock values was a real surprise. At this point, the Dow Jones Industrial Average plunged and recorded an all-time low of 6,594.44. It was a clear indication of the extreme volatility of the market.
Economic crises and several other factors contributed to the low stock values from 2009 to 2013. There was not much rise in stock prices during this period. However, 2013 changed the market scene once again.
The Dow Jones Industrial Average recovered from the recession and rose to more than 15,000 in May. It sparked a new hope in the stock market, and the prices started to go up. Then, in 2014, the Dow Jones Industrial Average finally entered the correction phase. It was a sigh of relief for investors across the globe.
However, in the time period between 2015, August, and 2016, April, the stock market again encountered volatility. The Dow Jones Industrial Average was not stable, and investors suspected a correction again. It was due to the economic downturn in China. However, the market gained stability when Trump entered the Presidential office.
In 2017, the Dow Jones Industrial Average obtained two streaks. It even lasted for more than ten days. It was unheard of since the year 1959 and was a major milestone for the market.
Then, in 2018, the North American Free Trade Agreement impacted the stock market positively. The Dow Jones Industrial Average struck the three 1,000-point milestones. In 2019, the Dow Jones Industrial Average has made 12 closes that are an all-time high. Trump’s announcement that the US would again negotiate trading with China played a massive role.
Why did the stock market flourish while the economy collapsed?
The all-time high of the stock market has led the investors to jump with joy. But, is the happiness going to last? Chances are it is not going to. Usually, such highs of the stock market are quickly followed by corrections.
Now, a vital question pops into the mind – why is the stock market rising steadily when there is an economic downturn? The answer is rather intriguing.
For example, take the situation of 2013. The United States was suffering through a difficult economic situation. There was news of an 8.2% reduction in the income levels of households. Moreover, the high unemployment rate of 7.9% was troubling. Despite all these financial constraints, Wall Street was buzzing. It sparked curiosity all over the country.
Experts are of the opinion that the US Federal Reserve is responsible for this. Their stimulus package and other government steps have led to the rise in stock prices.
Are billionaires dumping stocks a red flag?
Recently, the news of billionaires dumping shares has come to the forefront. Now, the intrigue lies at the alarming rate at which they are doing so.
For instance, John Paulson reportedly sold about 14 million shares in JPMorgan Chase. Moreover, he also dumped his entire worth in Sara Lee and Family dollar. There are many other examples, such as Berkshire Hathaway, etc.
It may be that economic experts have alluded to research that indicates massive correction. Moreover, this may have triggered the need for the billionaires to dump the shares. It is highly possible that they have information that justifies their action.
It is vital that you take note of every move that influences the stock market. This will give you a clue about what to do.
How to protect your assets from stock market crashes?
Now, there are various ways that you can protect your assets from stock market crashes. One thing that you can consider is the fixed index annuity.
It is a long-term saving, tax-deferred saving option. The contract between the life insurance firm and you allows you to get regular income over a long period of time. In return, you will have to pay an amount. Now, you can transform your 401K into the Fixed Index Annuity. But, you can also create a new one with cash.
There are numerous benefits that you can get from Fixed Index Annuity. First of all, it offers protection against low market values and has less risk potential. Moreover, the returns are actually based on the index performance like S&P 500.
The major advantage is that the tax-deferred status enables you to get compounded growth benefits. Moreover, there is no impact on your premium amount if the index does not perform well.
There are various factors that contribute to the development of a bull market. However, like every other market, it is not going to last forever. The stock market correction is expected after a long bull run. That is why the pre-mature celebration of all-time high stocks is not advisable. You may be facing a massive correction next week. But, what you can do is adopt measures to protect your assets. It is essential that you take advantage of the bull market. However, it is also crucial that you take preventive steps to avoid financial blows.