Inside the crash of ’18: What went wrong

The market has taken a few hard knocks in 2018, and unlike in previous years, it hasn’t bounced back quickly. Rather, it’s been staggering to its feet looking dazed and wobbly-kneed. The problem is, there’s no standing eight count in this game, so it keeps getting pummeled, again and again. The market is now down 9% from its high, and based on valuations, stocks are still priced at the very high end of acceptability. To put things in context, the market only fell as dramatically as it did because it had spiked so high, and it is only down 3% year-to-date. That’s worrying in another way, however. Bull markets almost always end in a euphoric blowout, the likes of which we saw in January.

As for the valuation problem, we already know relief is on the way. The huge Trump tax cuts are about to start hitting corporate profits, and that’s what it’s all about. For this, and various other reasons, I don’t think the party is over just yet, but I do believe the end is coming, and there’s very little chance of a soft landing. Income equality continues to increase, and along with crippling debt and the higher interest rates they bring, that will have a serious detrimental effect on spending and throttle the economy as it always has in the past.

What went wrong? I think you know.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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