George Kamel - 4 Things To Do If the Stock Market Dips

Episode Date: August 30, 2023

Today, I’m nixing the dramatic fortune telling and spitting FACTS ONLY about: what a stock market crash is, what causes one, what’s going on with the 2023 market, and what your go-to plan should be ANY TIME the stock market takes a dip. Links: SmartVestor Investing Professionals EveryDollar Budget Deal: I love a good deal, when you sign up using this link, I’ll hook you up with a 14-day free trial and $15 off your first year of the premium version of EveryDollar. Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

The economic roller coaster you've been forced onto simply by existing has been a wild ride the last few years. If you've seen the news, the headlines can feel like a bad parody of Pitbull's 2013 hit featuring Kesha. And at any point, the markets are going down while our 401ks are yelling timber. There's constant chatter about an inevitable looming stock market crash. Now, look, I'm not trying to be cavalier or naive here. Could there be a market crash in our future? Well, Bieber taught me to never say never, so I won't. Your body resembles a wild hyena.

But there also could be an alien invasion, or a public apology from Nickelback. They know what they did. Or a global pandemic caused by a disease that's transmitted through aerosol particles. I'm just saying it could happen. So the reality is that nobody knows exactly what the future holds. So today, I'm Nixon, the dramatic fortune-telling,

and spitting facts only about what a stock market crash is, what causes one, what's going on with the 2023 market, and what your go-to plan should be anytime the stock market takes a little dip. Kind of like your thumb or pointer finger is about to take a little dip onto those like and subscribe buttons. I know you were thinking about it. I'm giving you a real opportunity here and I know my boy Pitbull would totally d'Ale this one. Dallet. You want to give it to me, give it to me. I'll take it. I'll take it. I'll take it. So what is a stock market crash? Well, it's a sudden big drop in the value of stocks.

And a crash is typically caused by investors either noticing or anticipating a drop in stock prices. And this dip in prices makes them a little panicky. So they sell off their shares quickly to get out of the game with as much money as they can before the value of their investment drops. Kind of a domino effect here. Boom. So when lots of investors want to sell at the same time, the supply goes up, the demand goes down. That means the price of the stock drops a lot lower than it might have if everyone had just remained calm, and it basically just makes the situation worse for everyone. Remember the pandemic TP shortage? Panic is powerful, but you're not going to turn into one of those mindless mob monsters who almost made me settle for one plie, okay? Life is

too short and that ply is too thin. My parents didn't immigrate to this country so I could use one ply. Who is that, who did they make that for? Who's out there going like, that's my favorite. I'm glad they have it in stock. Like that, I wouldn't use that on my dog. Surprise. You're going to keep a level head about market fluctuations because you know for a fact, the stock market doesn't stay down forever. It recovers time and time again. In fact, with the exception of the Great Depression, every instance of market decline in the last hundred years has been followed by a remarkably fast recovery. The stock market crash of 1987, the market lost over 22% of its value in one day. But within two years, it had recovered

everything it lost. September 11th, 2001, terrorist attacks on our country caused markets to drop 7% in one day. But good news, just one month later, the stock market had returned to September 10th levels and continued to climb the rest of the year. The Great Recession of 2008, the Dow Jones, lost 50% of its value in one day. But it only took a few years for the market to bounce back better than ever. And we were in a bull market for a record-breaking 11 years after that. And let's look at the coronavirus crash of 2020. The pandemic triggered the most rapid global crash in financial history, but economists

are now calling it the shortest recession in history, only two months. And while that sounds short, it's also longer than any relationship you've had, Christopher, so pipe down. Let's sharpen up that hinge profile, bud. If you don't want to date me, that's five. I get that, but you're wrong and I hate you. Now, you might be thinking, well, George, the past is in the past. Anything could happen these days.

Well, what you really want to know is, how crashy, crashy is the market feeling this year? And again, we don't know, but we can look at what's currently happening with some of the factors that might contribute to a potential crash. Things like inflation. We all know inflation has been higher than normal, which is usually bad for the stock market because it causes uncertainty. Uncertainty makes people spend less money, which is not what you want to hear if you're a business owner.

And since the stock market is made up of businesses, it can be impacted by inflation. But the good news is inflation's cooling down. It was only 3% as of June 30th, which is way better than the 9% we peaked at last year. The next factor that could contribute to a market crash, interest rates. So the Federal Reserve, aka the Fed, has been slowly raising interest rates for a little over a year now. It's kind of like boiling a frog, right? You've got to do it slowly because you don't want the frog to jump out. And everybody watching thinks you're a sociopath regardless of your method.

And that's the nicest thing I can say about the Fed. Now, the impact of this on the stock market is similar to inflation. Everybody cuts back on spending because borrowing money is now really expensive, whether it's for a car or a house. And when that happens, business earnings usually take a hit, which makes stock prices fall too. But the gradual increases in interest are actually meant to help control market stability. And for the most part, it seems to be working.

Not as fast as any of us would hope, but it's working. Next factor on deck, a recession. Okay, people thought for sure. Sure, the economy's only option was a full-on recession. But it looks like we're in for more of a stable, soft landing to the market drama of the pandemic. And hopefully this holds up. Everyone got super spooked by the idea of a massive recession, and it turned out to be a big ol' nothing burger.

A nothing burger. A nothing burger. Big nothing burger. All right, last factor on the list. Big Tech. I hate to say it, but chat GPT and the robots may have literally saved the day. Big Tech is carrying team economy right now. And this is great for now because we really needed the boost.

But it could turn ugly in the future because now all of our economic eggs are in one big bionic basket. So there are some legitimate risk factors here. And to be clear, I'm not an economist or an expert on these matters. But if I'm cosplaying the economic weatherman today, I would say overall the market water seemed relatively calm for now. Still, what should you do if all that changes and the market does crash overnight and times get really tough and we all plummet into an emotional and financial depression?

Well, first of all, know that Pitbull has been there, done that. You know your book ground is a great day. It's time for part two. Refuse to panic. Look, in the event of a crash, the media wants you to be on the edge of your seat, hanging on to every word, dying in suspense, because this is their Super Bowl, right?

When things go wrong, they win. But there is no mystery to solve here. No need to call Wishbone or spark up a new season of cereal. Because historically speaking, the market always balances back. It's as predictable as the Hallmark movie, where the hardworking, frazzled city gal goes back to her small town and meets the simple country guy. and they end up living on the family farm.

Do I still watch them? Yes. Do I cry every time? Not every time, but usually. They're really good. They suck, but they're great. But they also mostly suck. So your job is to keep the big picture in mind,

regardless of the day-to-day market mood swings. I mean, just zoom out and look at the market over the last five years. It's gone up more than 64%. So if you're going to look at the scary headlines, you also have to grapple with the good news, too. So whenever you hear people freaking out, just pull out this graph and go full Phoebe, Luffy on them. I'm flaky. I'll say anything. It's a proven way to lower your blood pressure.

Next, if you're invested, stay invested. If the stock market has taken a tumble, do not sell. Here's why. When you leave your money in the market, you have a chance of earning all of its value back and then some. In fact, you have a really good chance of that happening. Because, again, the market always bounces back and always comes back stronger than ever eventually. But if you take your money out of the market while it's crashing, the loss is permanent. The damage is done. And it ends up being the worst time to have sold your investments. So play the long game and don't try to time the market. Focus on time in the market. The only people who get hurt on the roller coaster are the ones who jump off early. Next up, get an investment pro in your corner. You see, when the market

shifts, that's the time to talk to your investment pro. They're going to remind you of everything I'm saying right now. And they're going to have personalized advice for your specific age, funds, and types of investments. And if you've been investing without a pro in your corner, I highly recommend getting one. I've got one. Dave Ramsey has one, and you should too. I'll drop a link below where you can connect with financial advisors across the country that we trust to help you with this stuff. Next on the list, think about buying the dip. If the market is in freefall, that's the time to consider buying more investments. Why? Because wait for it, the market always bounces back. So buying when it takes a dip means the market is on sale, and y'all know I love a good sale.

Don't do it, Michael. Now, depending on your specific financial situation and responsibilities, investing more may not always be the right move for you. For example, if you've lost your job or there's a high risk you could get laid off, don't stress about investing right now. Focus on your four walls, food, utilities, housing, and transportation, and stack up as much savings as you possibly can until you get some stability. But if you're in a good spot when a crash hits, think of that as the bogo of investment opportunities. So to sum it up, the stock market is like your favorite childhood roller coaster. It has ups, it has downs, and if you jump off early, it's going to hurt like the dickens if you even live to tell the tale. Now that just hurts like the dickens.

So remember, stay in the game long term. Trust the historical data. Do not panic. Turn off the news and headlines and focus on your own day to day. It's one of the best reasons to follow the Ramsey Baby Steps, which are all about becoming and staying debt free, having three to six months of emergency savings, and investing for the long haul. And for heaven's sake, stop trying to be a hero and time the market. You're not that smart.

And if you were, you'd be a bazillionaire and not sitting here watching me Babelon. So if you enjoyed this video, share with your friends who might get spooked by market dips or excited by Pitbull references. We've got plenty of those. Either way, I will welcome them with digital open arms. Thanks for watching.

We'll see you guys next time.