Currently, the U.S. stock market is in the midst of one of the longest bull markets in its history. Since bottoming out in March 2009, the broad-based S&P 500 (INDEX: ^GSPC), led by a strong rally in technology stocks and other growth industries, has surged by more than 325%! Mind you, the stock market has historically returned 7% a year, inclusive of dividend reinvestment and adjusted for inflation. So, to say that things are going well right now would be an understatement.
But the fact of the matter is that this bull market won’t last forever. Stock market corrections are a healthy and normal part of the investing process. Data from market analytics firm Yardeni Research shows that there have been 36 corrections in the S&P 500 of at least 10% since 1950. That equates to about one every two years.
Just as interesting is the fact that 22 of these 36 corrections took place in 104 or fewer days. Or, in other words, when the stock market heads lower, it tends to do so with a swiftness that we usually don’t see when it’s moving to the upside.
Eventually, we'll see another stock market crash. The only question left to be answered is what will cause it.
Here are 10 events that may wind up being the next crash culprit.
Ultimately, there are only two truths when it comes to stock market crashes. The first, as was alluded to earlier, is that they’re inevitable. No matter what the Fed does in terms of monetary policy, the economy naturally goes through boom and bust cycles. This means stock market corrections and crashes are inevitable, too.
The only other certainty is that it’s impossible to know with any concreteness what event will cause the next crash. I could list 100 events that could be the downfall of the stock market, and yet none of those may come to fruition. It could wind up being some factor completely out of left field that pushes stocks lower.
But despite not knowing when corrections will occur, how long they’ll last, or what’ll be their root cause, it still pays to buy high-quality stocks and hang onto them for long periods of time. After all, the stock market has averaged a return of 7% annually on a historic basis, and that type of return is tough to beat.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.