Before we get into the question of ‘Will The Market Crash?’ we must understand that it quite difficult, if not impossible, to predict a market crash. As stock market is a place where emotional behavior drives the way.
One can never predict an emotional behavior as they can be either rational or irrational(mostly).
Warren Buffett and Charlie Munger never try to predict the market. They look at individual businesses and buy them at fair prices.
In the long term what matters is how your individual business is performing.
Plus one should also focus working on their behavior, because even if a market crash happens sooner or later, most people behave like the ducks shown here: link
Argument for No-Crash
Howard Marks in his 1991 Memo said that market never stays in its average/medium position rather spends most of its time in one of the extremes.
I feel that is what we have faced in past few months.
On March 23, 2020 we have had one extreme which was on the downside and now we are seeing the new extreme which is the all time high of the market.
I would highly recommend reading an article by LT3000 blog which makes quite strong of an argument on that it is highly unlikely that the market would crash.
He mentions that such level of crash happens once in a decade and every time its a new reason.
The reason for a market crash is fear from the unknown unknown (Coronavirus) and market stabilizes when this unknown unknown evolves into known unknown.
Many companies have started to claim that they have made the vaccine which is a good news but a superior problem would be having a distribution system to distribute the vaccine in the fastest way possible.
As the public is getting used to the virus day by day, people no longer fear the unknown.
Rather, I would like to take it further by saying that maybe as the vaccines will be out it would soon evolve into known known just like a cold.
Argument for a Crash
Second wave.
By the time the vaccine would be distributed it could be too late for many countries.
Perhaps, to prevent the wide spread if the government decides to lockdown for few days just before the vaccine arrives then I would expect a market crash.
But I feel even if crash the chances that it would reach the levels of March 23, 2020 is very difficult.
I agree with what LT3000 Blog said that people would be waiting out there to release their cash who missed the one time opportunity last time, which would lead to recovery of the fall instantly.
Another could be about liquidity in the economy by printing the money: Here is a thread which would explain it by a story.
Should You Buy Now?
I would suggest reading my previous article where I had talked about having a mindset where you look at business rather as stocks.
Currently investing in businesses which were not affected, could be the best theme to go for if you fear that market would crash.
Or, if you think that some business are still available at very cheap valuation and you are in the game for long term then I think you should invest in those business.
It all depends on what type of investor you are.
Inshort
As peter Thiel says in his book Zero To One, to test out that Facebook would work or not we would have to try it out in multiple worlds which is impossible as the same size is one.
Similarly, comparing it with Spanish flu would not make sense as the world has changed drastically from then.
Therefore, in the current scenario too we have the sample size of one. Hence, it is difficult to conclude anything from history.