The Next Massive Stock Market Crash Could Be Coming and Here's How to Be Ready
On 11 June 2020, Thursday, the stock market broke down and caused significant pullbacks in the market. Investors seemed to lose the confidence they have built up over the past months as they are now having doubts about whether an economic recovery is possible.
The physical and financial toll linked to the COVID-19 pandemic led to a ridiculous amount of selling pressure in the broad-based S&P 500 by mid-February. It marks the most sudden descents from a recent peak in history.
Although the stock market fell off a cliff in March, it seems to have recovered very well from and again dip into a bull market back. Over the past two months, the S&P 500 has rallied more than 50% off of its March 23 lows and even has its all-time high. This was shocking to many due to the current global uncertainty.
The most frequent question I get from my clients: Is this a sign of recovery or should we expect another stock market crash or correction?
My answer is: History has shown that a market crash or correction is inevitable.
There are possible reasons that could cause a massive sell-offs in the following weeks.
Photo Source: Bloomberg
1. The Second Wave
More than a dozen states in the US are showing significant resurgences in Novel Coronavirus/CV cases. Naturally, this will likely weigh on consumer confidence, employment, other data, and overall economic growth. As for Singapore, we were praised globally for our initial responses to the coronavirus without the need for a lockdown, however, things started to spiral down with and went out of control with the increasing outbreak spread among the foreign workers. Today, the government declared circuit breakers and with the closure and non-essential workplaces to curb the rise of a second wave of the pandemic.
With so many countries experiencing second waves of the coronavirus, we have to be prepared for another series of possible lockdown.
2. Increasing unemployment rates
More people are getting retrenched due to the global downturn; this means that the buying power of consumers will significantly decrease. Businesses will continue to suffer as they still continue to pay rent and customers are not spending due to the mini lockdown. The sharp drop in both economic activity and demand for goods and services at home and abroad will worsen the job market.
3. US and China Tension
The two nations have been playing the blaming game over the truth of the coronavirus outbreak in China, where cases were first reported. In response, Beijing suggested that the U.S. might be the real root of the global pandemic.
Their flaring tensions seem to have reignited when Trump announced to delist chinese companies from the US stock market. This restricts Chinese companies from trading their stocks in the American market. The decision was stirred from the recent fraud case by LUCKIN (LK). This pressures the Chinese companies to list their companies somewhere, such as under the Hang Seng Market .
With so much uncertainty, it is definitely difficult to make a decision whether one should get started in investing.
So what's the best move now?
Open an investment account, if you have not. (Feel free to DM me about this)
Save up all your cash, do dollar cost-averaging and stay diversified.
Cash are going to be your ammunition when market crash. The key is to stay invested for the long-term, don't get greedy and listen to rumours. Always check with your financial advisor on your financial portfolio to see if it still meets your needs and whether you will need to do a portfolio rebalancing.
There are top three recession-proof industries that I think would be massive in the next few years; if you would like to find out what they are and consider them to add to your investment portfolio, fill up this google form with your email address. I will send it to you the report is ready!
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