Of course no one knows where the stock markets will go next. Predictions are difficult to make, especially about the future. That said we do know stock market history and the history of stock market corrections. Can they be a guide? As they say, history doesn’t repeat itself but it does rhyme. Where will the stock markets go next?
This week on Seeking Alpha I published my most-read article on Seeking Alpha, ever. You’ll have to cut me some slack on the ‘sensational’ headline eh.
Ya see you’re not allowed to ask a question in a headline on Seeking Alpha. That would be rejected by the editors. They want concrete ‘direction’. None of this wishy-washy suggestion stuff that the markets MIGHT go lower from here.
But of course, if we’re talking about why the markets will go lower, it is a fair enough headline. I had called upon our favourite Canadian permabear, economist David Rosenberg. Mr. Rosenberg had offered that there’s only a 20% likelihood that we’ve seen the market lows. And if history is a guide, (if history rhymes) we’d likely see the stock markets go down another 30%, 40%, 50% from recent levels.
Market bottoms occur within the recession.
History also offers that the stock market bottoms always occur within the recession. We are certainly headed for a recession. That said, as many readers offered …
We’re already in a recession.
And of course what my super-smart Seeking Alpha readers and followers are offering is that when they call the recession, it will include the first quarter of 2020. If that’s the case, then yes the recent 30% correction would fall within the recession. That said, most of the stock market bottoms occur mid or late recession.
So time this market correction, right?
Of course not. My Seeking Alpha post aligns with a common theme – always be prepared. And you might be prepared for a real stock market correction. The real nasty kind. You might be prepared for The Big Puke. We did not have that yet, IMHO.
Don’t get too comfortable, and don’t quit your day job. That is likely a common theme of financial advisors these days.
If you’re investing on a regular schedule – bravo! Keep on keepin’ on. Ignore me. Ignore BNN and CNN and CNBC and hedge fund managers and that Mad Money Cramer guy. Just be prepared for things to get much worse. Get your dukes up; get ready to fight.
And certainly things could get much worse, or not. Past stock market carnage does not guarantee future stock market carnage.
They say cash is King! If you were one of those investors that likes to collect cash and wait for opportunity, you might simply save some for The Big Puke. Or, you might create a regular reinvestment schedule that spans 18 months or more. Many suggest that you should not be too quick to move in all those chips.
Most economists are not calling for that quick V-shaped economic recovery. Most appear to be in the camp of that gradual U-shaped recovery. This eventual economic liftoff will be more than difficult.
Reality might start to become important, again.
And it’s possible that stock markets might eventually react (again) to company earnings and prospects, bankruptcies, and general global economic prospects – aka reality. Lately, they’ve been reacting to the stimulus response that is 7-8 times greater than what government agencies delivered in the financial crisis of 2008-2009.
Again, have a read of that Seeking Alpha article and save an hour or more to go through the comments. A few readers have emailed me to suggest the comment section is fascinating. The comments are usually more interesting than my articles.
MoneySense is a great resource at all times, and especially in these troubling times. We might keep the cheery theme alive with How to prepare for a recession.
And sure let’s attempt to add at least a ray of sunshine. It is Easter Sunday after all.
On Findependencehub 15 ways to flourish in a COVID-19 world.
There’s plenty of fresh content on myownadvisor including Living Your Dream – Removing Financial Stress and Complexity. In that post Mark Seed interviews Larry Wilson the author of that new book release.
Here’s a very striking post from Scott Galloway that suggests the bailouts will save and serve the rich (once again). Scott had some personal experience on that subject as his company went to zero as big banks and others received tens of billions in the financial crisis. Here’s Capitalist or Cronyists? Who will be ‘saved’ in the COVID crisis?
And on that theme, the recent fix for stock and bond markets was very expensive. In fact it created the $40 Trillion Problem.
And eventually, we will have to get back to work. We might learn from Sweden that has practiced hybrid social distancing. They’ve kept many schools open, restaurants are open. They’ve had success. But are cracks beginning to show? Please have a read of Sweden continues with controversial coronavirus strategy, is it a big mistake?
Dividend daze and haze.
Mathew reports on Dividend Cut #4. This time the culprit is Chorus Aviation, they suspended their dividend. Hang in there buddy. That’s not a big surprise now that air travel is down by over 90%.
GenYMoney offers their March dividend update.
And here’s a March update from Chrissy at eastsleepbreathefi.
The Reformed Broker on the Fed throwing in another kitchen sink.
There is always an abundance of fresh content on The Evidence Based Investor. You might start with this Larry Swedroe piece – The economy and the stock markets are not the same thing.
And this week on Cut The Crap Investing I had the pleasure of reporting the uplifting behaviour of ETF investors who added monies in February and March.
Thanks for reading. Happy Easter. We’ll see you in the comment section. Just for kicks, where will the stock markets go next?
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Take care. Be safe.