Probability of a Major Stock Market Crash

本站添加: 2026-05-28

[00:00:00]Do you see a major drop in the stock market during Trump's term, or will he do everything to push it higher with small pullbacks? It depends on what you mean by major drop, because when you think back over the last uh year and a half, we've had a 20% bear market and a 10% correction.

[00:00:15]Historically, like those are the kind of moves that are like that that are expected. The types of like crashes that are like 50% crashes where markets stay down for a very long time, those are very very rare historically, and they take it they take extraordinary circumstances. And so, for example, it the financial crisis, number one, you had every major institution and you had every every household extremely over-leveraged. In fact, in like 2007, household leverage compared to assets peaked at like a 50-year high. Like it had never been higher. And so, those are the setups that you kind of need for massive unwinds that crash markets and keep them lower for a long time because all of the leverage in the system gets unwound and wiped out, and the purchasing power kind of just disappears for a long time. There isn't any money to come in and buy those things back up.

[00:01:09]Household balance sheets though, I made a video about this recently, they're very healthy. They're at 50-year lows.

[00:01:14]Like the household assets compared to debt or debt-to-asset ratio, it's at a 50-year low. So, there are some households that are hurting, but by and large across America, the median and average household balance sheets are actually very healthy. It's really hard to get a massive economic crash that can result in big market crash that is massive and sustained when you don't have a lot of leverage that can be unwound. Um and in fact, even like the margin debt in the market compared to market cap is only at like I think it's like 1 and 1/2%. Let me see if I can find that chart. 1.8%. So, this is investor margin debt relative to total market cap. So, yeah, it's been moving up recently, but this goes back to 1997.

[00:01:56]In no way, shape, or form is is is margin debt in the market anywhere near like what I would say is like overextended territory. It can go much much higher. So, it's just hard to get massive crashes that are that just stay and stick around and the market stay lower because people a lot of households and institution their balance sheets are so healthy that it's like, "Okay, when stuff falls, then I can buy it." You only get big crashes that stay low when people become forced sellers and then they don't have anything to use to re-buy.