If you're looking for the next stock market crash prediction, then you're better off preparing for one now. Stock market crash predictions are notoriously unreliable - no one can predict crashes with certainty - but you can prepare ahead. And it never hurts to prepare early.
Fortunately, we've got just the plan to protect your money no matter what the stock market is doing.
And there are some signs the stock market is overvalued...
Stock Market Crash Predictions Don't Work, Prepare Anyway
While we aren't predicting a stock market crash, there are some warning signs the record-high stock market won't last forever.
The Dow is up more than 230% since March 2009, making this the second-longest bull market ever. The Dow also just had a streak of six consecutive days of record-high closes, with Wednesday's 22,410.15 close being its highest ever.
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Despite these highs, there are some stock market crash warning signs. Now, these don't mean the stock market will crash, but they mean there's reason to believe the record highs won't last. Stock market corrections are healthy for the market, but any dip in the market could spiral into a larger sell-off if investors become worried.
That's part of what happened during the 1929 stock market crash. The Dow skyrocketed nearly 500% between 1920 and the crash in 1929. Unfortunately, the soaring values led investors to be overly optimistic about the market. Many, including Irving Fisher - a leading economist at the time - believed stocks had reached a "permanently high plateau," and thus couldn't fall. That led speculative investors to bid up the price of stocks, even though they were overvalued.
The market crashed in 1929, and the Dow lost 86% of its value between 1929 and 1932, wiping out people's entire net worth.
We aren't predicting this sort of devastation will happen again, but there are signs stocks are overvalued, and it's always a good idea for investors to protect their money...
Two Signs Stocks Are Overvalued Right Now
First, the U.S. Federal Reserve has boosted stocks with low interest rates. And those rates are rising.
The Fed tried to stimulate borrowing during the Great Recession by cutting interest rates. The rate fell from over 5% in 2007 to a mere 0.25% in 2008.
The Fed's plan worked, too.
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Between 2009 and 2016, publicly traded companies borrowed $1.9 trillion.
But they weren't spending the money on expansion projects or growing their businesses. They repurchased shares of their own stocks.
During the same time period, these public companies bought back over $2 trillion of their own shares. That means this cheap money practice by the Fed helped companies boost their own stock prices. And it also means once rates rise again, companies won't be able to borrow money to buy back shares so cheaply.
The Fed has already hiked rates to 1.25% and is predicting another three rate hikes in 2018. The era of low interest rates is ending.
Second, while low interest rates helped stimulate share buybacks, stocks are now priced at some of the highest values they've ever reached.
The Shiller price/earnings (P/E) ratio is a well-known measure of stock market valuation, and it shows the only times stocks have been this highly valued were before the 1929 stock market crash and the 2000 dot-com bubble.
Right now, the Shiller PE ratio is at 30.64, 83% above its historical average. Only twice has it gone higher. It hit 32.6 in 1929, before the stock market crash, and it hit 44.2 before the stock market crash in 2000.
That doesn't mean a stock market crash in 2018 is coming, but it's a sign the historic rally might not last much longer.
A market correction, or pullback of 10%, could be healthy for the markets, but any pullback can lead to panic, which could lead to bigger losses. Fortunately, you can protect your money and profit.
We're recommending two of the most resilient stocks on the market to protect your money. Both beat the market average during the last market correction, and they're both projected for double-digit gains over the next year...
How to Protect Your Money During a Stock Market Crash
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Money Morning Chief Investment Strategist Keith Fitz-Gerald recommends Raytheon Co. (NYSE: RTN) and Becton, Dickinson and Co. (NYSE: BDX), because these companies are well-run leaders in the "Unstoppable Trends."
The trick to making huge profits is to find "must-have" companies that fall into what Keith Fitz-Gerald calls the six "Unstoppable Trends": medicine, technology, demographics, scarcity/allocation, energy, and war, terrorism, and ugliness (also known as "defense"). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.
Not only are these stocks resilient during downturns because they are in demand, but they are both sporting double-digit price targets over the next year...
Raytheon Co. (NYSE: RTN) is a leader in the Unstoppable Trend of war, terrorism, and ugliness.
As one of the top five largest defense contractors, Raytheon has billions in contracts with the U.S. government and governments worldwide. International customers make up half of Raytheon's portfolio. And because defense is a global necessity whether the stock market is up or down, Raytheon will always be in demand.
For example, as tensions rise abroad, the United States is more likely to need more weapons and equipment. When the United States launched a missile strike on a Syrian airbase on April 7, Raytheon's stock jumped more than 2%, since its missiles were used. And RTN is up 4% this week as tensions between North Korea and the United States escalate, even as the threat of conflict has pushed the Dow down 1% in the same time.
RTN currently trades at $184.86 a share and pays a 1.73% dividend yield. RTN is up 30.18% this year, and Wall Street analysts are giving it one-year price targets as high as $212. That could bring owners a 15% gain.
Becton, Dickinson and Co. (NYSE: BDX) is our best play for the Unstoppable Trend of demographics.
BDX is a healthcare company specializing in single-usage medical products utilized in hospitals and long-term care facilities. But what makes this an Unstoppable Trend is an aging demographic in the United States. As the population gets older, more people will need medical care, especially long-term care. And because people need healthcare no matter what the stock market is doing, BDX's demand will continue to grow.
BDX is also an exceptionally well-managed company, which means it's turning that demand into profits for its investors.
Becton Dickinson has a 10.54% profit margin, even after a $12.2 billion takeover of CareFusion two years ago. That means the company's capital management is sustainable and will easily survive a market downturn. But most importantly, BDX transfers those profits to shareholders through its 1.5% dividend yield and growing share price.
BDX trades at $192.10 and is up 16.04% on the year. Wall Street analysts set one-year price targets for BDX as high as $230, a 20% jump.
This Stock Is Beating the Markets 16 to 1 - and It's Just Getting Started
Investing should be profitable. But the average market index fund may hit 8% a year... if it's lucky.
A 401(k) or IRA may do 7%... if you've got good management. The average hedge fund... well, they've been clobbered lately.
Meanwhile, one of Keith Fitz-Gerald's recent picks in his Money Map Report is beating the markets 16 to 1. It's up more than 22% since June 20.
It's just the latest winner from Keith, who regularly finds stocks set to rise on high-profit trends.
You can find out how to get that and all Keith's Money Map Report recommendations here.
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