Are you prepared for the next flash crash and social unrest not seen in 50 years?
We all know the market has been pretty good for quite a while. What we don’t know is when the party is going to end.
Will there be a wakeup call?
We may have just received one. In a brand new report from JP Morgan’s top quantitative analyst, Marko Kolanovic, he warns that “the next crisis we see will have flash crashes, sudden, severe stock drops, and social unrest not seen in 50 years.”
He writes, “The forces that have transformed markets in the last decade, namely the rise of computerized trading and passive investing, are setting up conditions for potentially violent moves once the current bull market ends.” This was part of a 168-page mega report, which was written for the 10th anniversary of the 2008 financial crisis, with perspectives from 48 of the bank’s analysts and economists.
Marco Kolanovic, is a 43-year-old analyst with a Ph.D. in theoretical physics. He rose to prominence by explaining, and occasionally predicting how the new algorithm dominated stock market will behave. He notes that “the current bull market has been characterized by extended periods of calm punctuated with spasms of selling known as flash crashes. Recent examples include a nearly 1,600 point intraday drop in February and a 1,100 point decline in August 2015.”
One very important note is that these so called “flash crashes” occurred during the good times of economic expansion. What happens if we are in a recession or a slowdown? It could be severe if it comes at the end of a cycle. It could even cause the end of a bull cycle.
I personally think the economic backdrop is very strong and stocks will continue to do well. I’m continuing to be optimistic for the rest of the year. Although, we are certainly due for more severe volatility and heavy corrections.
Pullbacks are not that big of a deal when we’re in our 20’s and 30’s, but it certainly is when we hit our late 40’s, 50’s and 60’s. Since it is my job to take care of my clients and make sure they are protected, getting the best returns with the least risk possible, I am always looking for danger signs. You cannot replace this money later in life. One lesson is important: Once you’ve won the game, stop playing!
The best way to know where you stand and to ensure that you retire comfortably is to stick to your retirement master plan. If you don’t have one, get one. It’s one of the many important things we provide complimentary for our clients.
If you would like to learn more about our disciplined investment and financial planning approach that manages risk and delivers returns, while being conscious of forward-looking tax-strategies and retirement income opportunities, contact us today for a free no obligation consultation.
P.S. Invest for need, not for greed™