Dow Jones Crash Predictions

By Dale Gillham | Published 21 May 2019

Dale Gillham provides an update on the US stock market with Jim Beach from the School for Startups Radio. Both the S&P 500 and the Dow Jones industrial average fell nearly 3 percent on Monday on news that the US china trade war dispute was heating up. In fact, some were making predictions that the Dow Jones would crash. However, on Tuesday both markets had made up most of the ground they had lost, with the S&P 500 closing down for the week around 0.69%.

Interestingly, there is divergence between the Dow Jones and the S&P 500, as the S&P 500 has traded to new highs while the Dow Jones average has not.

Looking at what the stock market will do in 2019, there are reports that the S&P 500 is currently over valued, which normally means the market would need to fall to adjust to more sustainable levels. Right now, the PE of the S&P 500 is 21.72, while the long-term mean price earnings is around 15.74. So while it can be considered overvalued, the question is, should we be worried about it and the answer is a resounding no.

The PE ratio is what an investor pays for $1 of a company’s earnings. It is calculated by taking the current stock price and dividing it by the earnings per share. So why is the stock market down right now? Because reporting season always causes volatility, so there is nothing to be concerned about as the future outlook for the US stock market is good with more upside likely to unfold.

On another note, the Uber IPO in May 2019 has not gone well with the stock falling away since it opened as people have mistakenly believed it is the next Facebook. Right now, it is best to sit back and watch, and wait for a better time to buy into Uber.

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