This year, one question has been quietly buzzing just beneath the surface of an otherwise soaring stock market: Are we on the verge of another crash?
In this week’s episode of the HerMoney Podcast, Jean Chatzky sits down with Andrew Ross Sorkin, New York Times bestselling author of Too Big to Fail and 1929: Inside the Greatest Crash in Wall Street History—And How It Shattered a Nation. As Sorkin explains, while the exact causes of crashes change over time, the patterns don’t.
The Warning Signs Andrew Ross Sorkin Is Watching Right Now
Jean Chatzky: How likely is a downturn like we saw in 1929, and what is your best guess as to when that might happen?
Andrew Ross Sorkin: My hope is we won’t have a crash that leads to a great depression like 1929. But I do think it’s almost impossible not to believe that we won’t have some kind of crash that is more akin to what happened in 1999.
We had an enormous internet bubble, but there was what some people would call a massive, massive correction. And I think when you look at what’s happening today in our economy and a lot of the imbalances, but really the excitement in euphoria around artificial intelligence and all of the frankly, indiscriminate spending that’s going on in that space, which is similar to what was happening in the late nineties. It wouldn’t be surprising to me if there was a big pullback of some sort.
What This Means for Your Money
Jean Chatzky: Do we ever feel as if we’re on the verge of a crash?
Andrew Ross Sorkin: I don’t think that most people do. And even when they do and they see the market continuing to go higher, they fear missing out. If you are retiring or you actually do need the cash and you’re worried about a crash, it might be worth having a rainy day fund that’s available to you. On the flip side, if you have a 10, 20, or 30-year time horizon, I like to believe that you will be better off in 30 years, having stayed the course.
Back in 1928, Charles Merrill, who ran Merrill Lynch, told people to get outta the market, and he was right in a certain way, but actually very wrong in another way. Between the beginning of 1928 and September 1929, the stock market went up 90%. So if you had listened to Charles Merrill, you would not have been the happiest camper. So this is why it’s complicated.
The Hope in History
Jean Chatzky: What’s the silver lining in looking back this far? Does understanding the past give you greater clarity as far as the future?
Andrew Ross Sorkin: It does, and I’ll tell you why. Because even though we had a crash in 1929, and even though we had a crash in 1999, and even though we had a crash in 2008, things have invariably gotten better. Every single time.
I actually am very excited about AI and new technologies. And so I do have optimism about our economic future. And in truth, I have optimism about our broader future. I’ve got three kids, so I have to.
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