Just a warning…the stock market is (probably) about to crash

Spencer Stout , Reporter

On Jan. 6, 2017, the DOW Jones Industrial Average (the collective value of 30 of America’s most notable stocks) hit 20,000 points for the first time in history. This milestone was a continuation of the incredible increase of stock value since Donald Trump was elected on Nov. 8, 2016. To top it off, the DOW hit 22,000 on August 8, a swell that President Trump has personally taken credit for.


Following the first 76 days of President Trump’s historical inauguration, the average DOW Jones stock value increased an incredible 15.2%, a spike second only to the rise following Herbert Hoover’s election. This piece of information may fire off some warnings for anyone who knows that Herbert Hoover was the President in 1929 when the Stock Market crashed.


Herbert Hoover’s campaign platform was very similar to that of Donald Trump. Both promised great tax cuts, decreased regulations on businesses, and welfare reform in order to initiate growth in American manufacturing jobs. As a proud Capitalist, I am fully confident in saying these were not and will not be the cause of a decline in stock value. It is rather the unwarranted confidence the American people put in these two President’s policy to foster economic growth so quickly that will lead to a plummet in stock prices.


For those who aren’t familiar with how stock works, a stock’s value isn’t entirely reflective on how successful the entity currently is. Stock prices, rather (in very, very broad sense), are predominantly representative of how confident people are about that entity, currently and in the future. The recent rise in stock prices is a clear representation that investors are confident in the continual success of American businesses.


However, one of the primary reasons the stock market crashed in 1929 (aside from the fact that everyone was buying stock on credit) was that people realized that stock prices were incredibly over-valued. There was barely any statistical data to support that the increase of earnings and production of American businesses were anywhere near as great as the rise in stock prices. And, when people realized this fact, people began to sell and sell and sell, causing a scare that literally caused most stock to flatline.


Today, we can see this trend in many of the companies that have become beneficiaries (or victims) of misplaced confidence in Trump’s ability to reinvigorate the economy in such a short period of time. Boeing, whose stock prices jumped 80% following Trump’s promises to increase military spending became a reality, is at risk of facing a future scare. In reality, although Boeing has received increase revenue following Trump’s election, earnings have only risen 8%, a number nowhere close to justifying an 80% increase in stock value. Boeing is not the only company like this. Northrup Grumman, General Dynamics, and Tesla have all had stock increases over the last year that are much higher than growth in most of their financial indicators.


Now, some of you are probably wondering how valid the financial prediction that a senior in high school without a degree in finance nor economics could possibly be. And, I admit that would be a fair accusation, except that I’m not the only one saying this. Richard Taler, the 2017 Nobel Winner for Economics, admitted in an October 10th interview with Bloomberg that he too is “extremely nervous about the stock market.”


Take all of this information however you see fit. However, when the market does drop in the near future, I’ll be ready to say I told you so.