The Dow Jones is down more than 150 points in morning trading today (Monday, Feb. 5) after dropping more than 600 points last Friday. This sell-off is prompting many investors to wonder if there will there be a 2018 stock market crash.
With the Dow dropping over 5% from its 2018 high, this is a reasonable question to ask. But we want to make one thing clear: This is not the time to panic...
Since the current bull market began in 2009, the Dow has climbed 269%, adding on 31% of its climb in just the last year. In fact, this staggering rise has created the second-longest bull market in history.
As a consequence, stock valuations have risen to shockingly high levels. The cyclically adjusted price-earnings (CAPE) ratio climbed as high as 34.18, which is more than double its historical average. That's higher than the levels it hit before the 1929 stock market crash.
While high valuations and rising volatility are something to keep an eye on, we don't think they indicate an imminent 2018 stock market crash.
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In fact, we think this could actually be good sign for the future of your portfolio. Market pullbacks, and even market corrections, are indicators of a healthy market.
Money Morning Chief Investment Strategist Keith Fitz-Gerald even expects a market correction to happen in the first quarter of this year. But that's very different from a market crash.
"That sounds scary, but it doesn't have to be," Keith told us.
Here's what he means, and why it's always important to have a plan to protect your money from a future market crash...
Why It's Essential to Prepare for a Stock Market Crash
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Keith says 2018's market correction will be a strong indicator of a healthy, normal stock market.
"A lot of people forget the markets need buying and selling to move higher," Keith says. "It's a fundamental law of capitalism, and it's your key to bigger profits."
This means that any sell-off in the markets is a sign they're functioning properly and have more room to grow.
Keith expects the Dow to correct several times as it continues to rise and reach higher levels in the future. In fact, Keith thinks these corrections could help take the Dow to the 60,000 level...
However, if you want to be in a position to profit, you must be prepared...
You see, many investors attempt to time the market by waiting for a market correction to bring prices down before they buy. However, attempting to time the market is usually a fool's errand that will limit your profit potential.
As an investor, you must be ready to weather a correction even when the markets are soaring and all indicators suggest that there won't be a downturn anytime soon.
Keith calls this one of the "single most powerful moneymaking lessons I have ever learned."
If you're thinking about a stock market crash, or even how to play the current downturn, now is the perfect time to make a plan in order to be prepared.
And we have a complimentary, four-part strategy to help you protect your portfolio - and even profit - during the next downturn. Just click here to see how to protect your wealth in four simple steps...
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