Will The Stock Market Crash One More Time in 2020?
31 August 2020
My Bet: In 2020, The Stock Market Will Not Crash Again
Yes, it is hard to predict where the stock market is heading in the short term.
But my bet with regards to virus-related concern is that I do not think that we will crash again back to March-April Lows in 2020 just because of the virus.
Here Are Four Reasons Why I Think The Stock Market Will Not Crash Again to March Lows in 2020:
#1 We Now Know More About The Virus
Why does the market crash?
In my view, a serious market crash happens because of uncertainties and “shock factor”.
Events like the COVID-19 and the financial crisis back in 2008 resulted in a serious market crash because they are shocking and nobody predicted it.
So in times of uncertainties, the market crash.
Just like in WW1, WW2 so on, and so forth.
It is a fact that now we know more about the virus than we did when it first happened in March-April 2020.
So right now, the uncertainty factor is gone.
As a result, the market is back to its previous high and more.
We need another black-swan and shocking event to cause another crash.
#2 A Safe and Effective Vaccine is Almost A Certainty
We now know that the COVID-19 virus can be defeated.
A vaccine that is effective against the COVID-19 virus can potentially be created.
To me, it is almost a certainty.
It is just a matter of time.
In fact, while FDA requires the vaccine to be at least 50% efficacious for them to be approved, Bill Gates mentioned in an interview that he expects the vaccines to eventually be around 80% efficacious.
Just today, the US again floated the idea of early COVID-19 vaccine approval.
The current three leading vaccines companies are AstraZeneca which is partnering Oxford University, Moderna which is collaborating with the US National Institutes of Health and the Pfizer/BionTech alliance.
The US Food and Drug Administration is one of the most well-respected organizations in the world to approve the safety and effectiveness of vaccines.
I am sure the FDA will only approve the vaccine only if they are proven to be safe and effective based on scientific evidence.
#3 It is Hard to Bet Against Human Spirit of Resiliency
For the pandemic to be put to a halt, we need enough people to take the vaccine.
If there is one thing we can learn from history is: It is hard to bet against the human spirit of resiliency.
When things get tough, humans have proven to be very resilient.
We have been through WW1, WW2, the financial crisis, and many other horrible situations before.
Not only we survived, but we also grew.
Case in point: To make a vaccine, it usually requires a couple of years, but when humans put their minds to it, things get done. I believe a safe and efficacious vaccine can be made (and is in progress to be made) in less than a year.
We have grown accustomed to wearing a mask and do social distancing, once more people take the vaccine – when it is proven to be efficacious, I am sure we will prevail and grow.
#4 TINA – “There Is No Alternative”
In a low-interest-rate environment, there is little competition against stocks.
Stocks, which represent ownership in companies are very attractive when you compare them to bank interest rates or bonds.
Based on BNP Paribas, bond yields are set to remain low for an extremely long time.
The hunt for yields will instead shift to stocks, for example, the safer and growing dividend stocks commonly known as “dividend aristocrats”.
When there is not much attractive alternative to put our cash to good use to avoid losing money on inflation, stocks become a very appealing consideration.
So, Will The Stock Market Crash Again in the Future?
This is a certainty.
But it is also a certainty that nobody have the crystal ball to predict exactly when the stock market will crash.
So… Should we try to predict the next stock market crash?
I think that more money has been lost trying to predict the next stock market crash than the actual crash.
Here’s a headline in CNBC back on July 6, 2020, that predicted a doom: “Financial analyst Gary Shilling says the stock market could see a 1930s-like decline“.
And now, the stock market has recovered to more than the previous high.
Again, like the Legendary Fund Manager Peter Lynch said, more money has been lost trying to predict the next stock market crash than in the actual crash.
The key is: Invest properly, don’t gamble.
We must only invest in companies we understand well and at a valuation that is reasonable.
As Warren Buffett says, Gambling in the stock market is a losing proposition.
Although I predict that it is unlikely that because of the SAME virus concern, the stock market will hit earlier March-April 2020 stock market lows, we should invest prudently.
I always believe that we should have a balance of emotion when investing.
Do not partake in madness in the stock market with stocks that are too expensive.
The party is bound to stop one day.
Stay invested in the right companies that continue to grow and that we bought at reasonable prices.
Over the long run, the odds are likely to be with us.
So stay safe, and may 2020 be a good year for us – as investors of the stock market!
Another must-read: The Intelligent Investor Summary (Ultimate Guide) | Re-ThinkWealth.
Was this article useful for you?
If it is, would really appreciate it if you could take one minute to share it on Facebook.
The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.
Important: Please read our full disclaimer.
Especially For Ambitious Professionals and Business Owners
- Our Telegram Channel – If you’d like to hear interesting stuff daily on stocks, business, economy, and value investing knowledge, please join our free telegram channel here.
- By Invitation-Only Mentorship – We specialize in coaching (1-on-1) ambitious professionals and business owners looking to learn how to invest in stocks safely and sustainably. The results from our mentees have been amazing so far. Learn more about The Mentorship here.
More from Chris
Snowflake does cloud computing that implements a variable pricing model, which can be at times more attractive than fixed packages offered by more prominent competitors. The market for […]
The adage that “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” by Benjamin Graham could not be more true over the past few days. As of 9 September 2020, […]
Yesterday (3 September 2020), the US market had its deepest one day decline since June. The S&P 500 and Nasdaq had their deepest declines since June 11 and for Dow, it was their biggest decline since June 26 […]
Think About How SIA Was When Times Was “Normal” Before we got into this COVID-19 mess, SIA is already not a great business to own even when times were “normal.” All of us know that the airline […]
In this article, I’d like to share eight signs of potential fraud in our stocks portfolio that we should be careful of. These are eight simple potential warning signs of bad financial reporting or early markers […]
3. As of 1H20, Most Earnings Paid Out As Dividends Based on AEM 1H20 reports, their cumulative capital allocation breakdown from 2017 to 1H2020 is as follows: Dividends – 47%, Acquisitions – 25%, Capex – 18%, Buybacks – 10%. It is interesting to note that […]
Eastman Kodak Company (NYSE: KODK) opened at $2.15 (Monday) on July 27, 2020, and closed at $33.20 (Wednesday) by 29 July 2020. That is a 1,444.19% increase over a two day period. In this article, I am going to give you some background on the Kodak company, the reason […]
Last Friday on 24 July 2020, Intel closed 16.24% down. Although I do not own any Intel stock, I was curious why it fell after releasing its Q2 2020 results. Just a while ago, I saw the news that after 15 years of partnership, Apple decided to break up with Intel and stop using its […]
1. Temasek Portfolio is Huge. Although I know that Temasek has a huge portfolio, I was surprised to see that it is around the size of Warren Buffett’s. As of 31 March 2020, the net portfolio value or NPV is at S$306 billion. So we have our own Warren Buffett in Singapore, that is […]
Who is Adam Smith? Adam Smith (1723-1790) was a philosopher and economist who was best known for authoring the book An Inquiry into the Nature and Causes of the Wealth of Nations. Wealth of Nations also happens to be one of Warren Buffett’s favourite books […]
As a value investor, as a practitioner of value investing, I am very interested in studying funds I view as an executioner of the various value investing methodologies I myself am very passionate about. In this article, I will list down some of the value investing funds in […]
Being a successful investor requires us to have equanimity in everything we do. There are many benefits to keeping a gratitude journal, firstly, the balance of emotion. Would you rather make $100,000 a year but all your friends and neighbors make $200,000 a year or […]