A coworker told me he thinks as long as people think it might crash it won’t crash.
Keeping money in S&P500 index funds is giving 5-10% returns over the past three and a half years. Bank accounts and money-market funds don't even give you 1% over that period.
The current fetishisation of index funds - which I am entirely complicit in - seems to be based on drawing long-term extrapolations from a relatively short timescale in a relatively narrow market which didn't actually have funds that tracked indices, saw the rise of modern computing, and followed the most destructive wars in the Western world.
1) most people thinking that a crash is near means that they view the stock market to be overpriced.
2) this means they won't buy as much and inflate prices even further. in fact, many may start to sell.
3) this will tend to limit price increases and may even depress the markets a bit
4) Thus, while there may be a decline if economic conditions turn sour, there's a lower likelihood of a "crash" (large drop from current prices).
3) this will cause prices to start dropping, which increases uncertainty, and causes additional sells.
4) thus we enter a loop where uncertainty increases, which causes more selling, which causes price decreases, and the market crashes.
Market prices are largely a function of market confidence. If confidence erodes, so does the market. It's how bubbles burst.