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Hi guys, I’m Ben & welcome to Motivation to invest Our mission is to motivate you to invest for your financial freedom, by providing you with valuable tips & strategies.
Now, I received a number of requests from you guys asking BEN, IS the stock market about to crash again!?
Now the fact is no one know’s & RANDOM UNPREDICTABLE BLACK SWAN EVENT’s just can’t be predicted….
Or they wouldn’t be RANDOM & UNPREDICTABLE!?
Now a variety of different stock market analysts online are issuing contradicting statements.
Some analysts are making valid points by pointing out that the stock market has currently risen massively despite the Economy being halted & still in deep freeze, with Unemployment & Government debt also at an all time high!
So in this video…I’m going to explain why many analysts think that the stock market will crash again!? And WHAT is the best investing strategy to use during these uncertain times!!
LETS DIVE IN!
The First Stock Market Crash in 2020?
The recent global pandemic saw the stock market drop massively and un-expectantly as panic reigned & fear gripped investors.
The S&P 500’s longest bull run in history was put to an end and by March the 23rd as it had fell by over 34%.
The FTSE 100 had it’s largest quarterly fall of 25%, SINCE black Monday occurred over three decades ago back in 1987.
Government Stimulus?
Then in the recent weeks following the crash, governments & central banks from around the world have pumped trillion’s of dollars into the economy in order to keep it afloat.
The US Federal reverse released it’s largest ever stimulus package of over $2 Trillion!
The U.K, pumped £30 billion into the system as part of a Stimulation or “Financial Survival” package.
we have seen employees being furloughed & offered 80% of their salary by the government, while many businesses were offered Grants & loans to keep them afloat during lockdown!
Moreover, Taxes were differed until next year and The Bank of England cut it’s base rate to just 0.1%!
HOW did the stock market respond?
Now the stock market responded really well to this wave of stimulus packages offered by governments from across the world.
With the S&P 500 Rallying & The FTSE 100 in the U.K also increasing in value!!!
So Are we on the road to recovery?
Well not just yet, ALL THIS money which has been pumped into the ECONOMY is merely PROPING it up!!
This stimulus money has to come from someone & if the banks keep printing it, then can lead to a whole host of economic troubles!!
Will Hyperinflation happen??
SUCH AS HYPER INFLATION, this is where so much money has been printed that it effectively becomes WORTHLESS.
This happened in Germany between 1921 & 1923 which the saw the german currency, the “Mark” effectively become worthless. This was triggered by large debt’s from WW1 which Germany was ordered to pay amongst a host of other issues.
Long story short this actually got so bad that a loaf of bread cost 4.6 million marks!!!!
People were throwing money in the street as it was effectively useless. They eventually solved this issue scraping the old currency & issuing a New currency called the Rentan mark.
COULD THIS HAPPEN AGAIN?
Well I don’t believe this will happen again but anything can happen…and no one can predict the unpredictable.
The bank of england’s job is to keep inflation at below 2%.
But they have a difficult job on there hands with more money being printed to prop up the economy!
The fact the world economy is currently propped up by money which has been pumped into the system.
This is a little bit like if your car breaks down & the engine stops running, (That is, people have stopped working, transactions slow down & thus the velocity of money slows down)
Then your friend offers to PUSH the CAR for you!!
(Now this may seem fine for a short period while the car is moving) —But it’s not sustainable over a long period of time!!!!
Your friend will get tired, he will lose energy, need breaks, food etc.
That is the same situation with the government stimulus packages. There are no free lunches.
IN the words of ISSAC NEWTON EVERY ACTION has an equal & opposite reaction.
RAY DALIO the great investor also has come out & stated that we are at the end of the “Long term debt cycle which lasts approximately 60-80 years” .
Thus a potential crash or market depression could be on the horizon.
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WHAT IS THE SOLUTION for stock market investors?
Well at the moment you have three types of investors, the first type are those like myself who got in early during the first crash and invested hard!
We have seen initial rewards as the stock market prices rose as the stimulus packages were released.
However, we know this is a long term investment so Most of us will be holding on for the market to recover fully.
Traders will be jumping in & out and trying to maximise profits during this volatility.
And then you have the other type of investor, those that know the economy is only propped up & believe that if the engine doesn’t start running soon. The stock market could drop even harder & then they will buy in & make massive profits!!!!
SO will it crash again?
Like I mentioned previously the fact is it could crash again & many economic analysts think so. But many analysts also think we are set for a V SHAPED recovery.
As in the stock market has crashed & it will recover fast.
HOW LONG DID PREVIOUS CRASHES TAKE TO RECOVER?
Historic data shows the average BEAR or depressed market lasted 11 months while the average bull market lasts 30 months. If you were invested through both these times & didn’t sell. on average your portfolio would lose -26% every bear market & gain 110% when the market recovers.
Now although past data does not predict future results it’s still the best information we have available.
WHAT’s the alternative?
Let’s say for example, there is a major depression or even hyperinflation & the value of paper money goes to zero.
Then your money in the bank will effectively be worth zero anyway, or achieving a 0.1% interest rate.
ON the other hand if an even worse catastrophic event happened such as nuclear war or likes, you will also have other things to worry about.
However, the likelihood is that the markets will eventually recover over the long term & this is just another one of those opportunities which will reward those who are contrarian investors.
As the great warren buffett would say.
“Be fearful while others are greedy & greedy while other are fearful”
SO WHAT I AM DOING with my stock market portfolio?
I am following my investment strategy of BUY & HOLD FOR THE LONG TERM & the wise words of Warren Buffett
“Time in the market is greater than trying to timing the market”
I will hold my current positions for the LONG TERM & not sell despite profits been on the table, I will also be looking for any new opportunities which may arise should the market crash again to new lows.
My method is to take a LOW RISK, HIGH REWARD approach. (Not high risk, high reward)
I am diversifying my portfolio across a variety of sectors, funds & stocks with less than 1% of my portfolio exposed to any individual stock.
So if that company did go bankrupt I would only lose 1%.
Now remember this is not financial advice & I’m not advising anyone to go & plow all your money into the markets. Instead you need to assess your own financial goals, your risk tolerance and ONLY INVEST WHAT YOU CAN AFFORD TO LOSE.
Never invest any money which you need to use in the short term to pay your bills etc.
DO YOU THINK THE STOCK MARKET IS GOING TO CRASH AGAIN?
How are you preparing your portfolio!!!
COMMENT on the youtube video!
