Wall Street Is Predicting a Crash. Wall Street Is Usually Wrong.

There’s always a prediction to be found about the stock market. Even I can predict that I won’t be surprised if the market crashes in 2026, because it has run up so much in recent years, and also because there’s a lot of global economic and political unrest. But I’ll also concede that I could be wrong; this year could be another with double-digit gains.

It’s worth appreciating how often financial pundits are wrong, so that you won’t put too much faith in them. Even the smartest ones can be wrong — including Warren Buffett, one of the greatest investors ever. Here are some fun examples of Wall Streeters getting it wrong:

• A book titled Dow 30,000 by 2008!: Why It’s Different This Time was published in 2001 by a fellow who had earned the Chartered Financial Analyst designation, which isn’t easy to earn. The Dow Jones Industrial Average did not hit 30,000 by 2008, though — in fact, in 2008, the Dow sank by nearly 34%. (It did finally cross the 30,000 mark in 2020.)
• In early 2013, Harry S. Dent, author of books such as The Great Depression Ahead and The Great Crash Ahead, predicted that a major stock market crash would occur later in the year. Well, 2013 ended with the Dow up 26.5% and the S&P 500 index up 32.4%.
• In 1995, Robert Metcalfe, who had co-created Ethernet, predicted that a “catastrophic” collapse of the internet was imminent. He, too, was wrong.

If you act on predictions, you could end up losing a lot. You could sell out of fear shortly before a market surge. Or you might jump in after hearing about a boom ahead, only to be present for a big crash instead.

What to do

Instead of giving too much credence to market predictions, just focus on investing rationally. So:

• Expect occasional market corrections and crashes, because they happen every few years.
• Don’t keep any money you might need within five years (or, to be more conservative, 10 years) in stocks. (You don’t want to have to sell when the market is down.)
• Try to view market crashes as the wonderful opportunities they can be, if you have some cash on hand — because that’s when great stocks will be on sale.
• When crashes happen, plan to just wait them out. They usually (but not always) only last a few months.
• Try not to engage in market-timing, guessing when to jump into or out of the market, as it’s generally futile.

Do enjoy predictions when you come across them. Some will indeed come true — but we just can’t know which ones.