Far From The Bottom
Updated: Jul 3, 2020
The market fell by around 7% this week, but only after an unexpected rally on Friday, which was the S&P500’s biggest 1-day gain since 2008. For me, there is little positivity in the market right now. And there is a great deal of uncertainty from what card Trump is going to play to how worse can the C-19 situation get. As such, I will continue to wait and look for any signs of value in the market.
How long will this bear market last?
While this sudden plunge into the bear market seems painful to many, the only positive element is that the sharper the fall, the shorter the length of the bear market. Bear markets on average can last 1 – 1.5 years with the shortest one was in 1990, where it lasted just 3 months, though it can also last for years. So how long do I think this one will last? Frankly, I have no idea, but what makes this bear market different from the ones in the past are 3 main factors.
Firstly, this decline follows one of the longest bull markets we have seen, spanning 11 years since 2008. This is important because for the whole of 2019 we have been hearing everyone saying that the next recession is just around the corner which gives an indication what the market is thinking. Market sentiment is especially important when studying the stock market because it is essentially what controls the prices.
Secondly, is the C-19 situation. We have no idea how long this will play out, however it could delay the recovery of the market as the infectability of this disease will have influence over any global supply chain.
Thirdly, 2020 is an election year in the US. And we can fully expect politicians pulling out any tricks they can conjure up to influence this market. We are already seeing this as Trump tries to “encourage” the Feds to run with his agenda. In fact just this morning, Trump made a veiled threat at Federal Reserve Chairman, Jerome Powell, that he could very well be removed or demoted if he doesn’t get in line.
With all these factors, the market can go in any direction in the foreseeable future.
There is little update to my portfolio. It is following the market in its steep dive. Most of the gains I had made have been eroded or sold off. The biggest casualty this week has been my Stashaway portfolio which had about $1k or 13% of gains which is now almost all gone. Bank Of America (BAC) is my hardest hit stock with a loss of 25% and counting.
On the weekly view, I keep hoping we have hit the bottom, but I keep getting more surprises.
Not much updates on dividends. Most of the dividend stock prices have also dropped which makes all their yields look very attractive. However, I am cautious to jump in right now as some of these companies are expected to cut their dividends as the economic downturn goes on. This is a key time for dividend investors. If you are able to pick the stocks that will maintain their dividend during this time, you can get amazing yields of more than 7% on your investments. But if you pick wrong, it could be a double whammy as the dividend and the value of these stocks can head south locking in your investments for a long time.
In conclusion, I will end of this post the same way as my last few posts; just wait and see how it plays out.
Disclaimer: This post should not be interpreted as investment advice as I am not a professional financial consultant. The objective of this blog is to share my experiences with others and receive feedback. I will provide links to my information sources to the best of my abilities, but the reader is responsible for their own due diligence