Category Archives: Market Outlook

Coronavirus Stock Market Crash 2020: When’s the Best Time to Buy Stocks?

The coronavirus stock market crash is in progress. The storm came fast and furious with the U.S. and Canadian stock markets falling about 21% in a month. And that was after they were somewhat lifted by a relief rally on Friday.

Image of viruses being airborne in a Chinese city
Keep you, your family, and friends safe

The turnaround or contrarian stock ideas I discussed, in my last video, were way too early to be considered. My positions in Carnival (NYSE:CCL, LSE:CCL) and Booking Holdings (NASDAQ:BKNG)stocks, respectively, are down 40% and 18%.

In the previous video, I said Carnival stock could triple one’s investment. At the current levels, it can be a six-bagger over five years, if it makes a comeback. 

Of course, the coronavirus pandemic can drag these stocks even lower. In the worst-case scenario, Carnival could go bankrupt. However, it’s too early to conclude that it will. The probability of it going bankrupt should be slim given it is a leading global cruise company and has an A-grade balance sheet

How the Coronavirus is Affecting Stocks

Stocks are driven by their underlying businesses. Due to the coronavirus, Walt Disney (NYSE:DIS) will begin shutting down its theme parks in Florida and Paris and new departures for Disney Cruise Line starting this weekend for a month. However, it’ll continue to pay its employees.

These follow the forced shutdowns of its parks in Shanghai, Hong Kong, and Japan. Without a doubt, all of these suspended operations will pressure Disney’s near-term earnings.

Across Italy, Starbucks (NASDAQ:SBUX) is closing its stores until April 3, while Burger King, a part of Restaurant Brands (NYSE:QSR, TSX:QSR), will remain closed until the end of the health emergency

It’s no wonder Disney stock has fallen 27% since its high in February. Starbucks stock has dropped 22%, and Restaurant Brands’ stock value is slashed 31%.

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Stock Market Crash 2020: 3 Top Stocks To Buy

Summary

  • Top stocks: United Airlines (and airline stocks in general), Carnival, and Booking
  • Higher risk investors can do their due diligence to see if the stocks are suitable investments for them
  • Carnival pays a dividend but it can cut the dividend if things get really bad

I made this video, and I hope it gives a broader perspective on the investment landscape on top of the usual dividend ideas I give.

In late January, in my video “Will the Stock Market Crash in 2020?”, I essentially said that any negative impact on the economy can “drag the market down to its normal valuation of about 17 times earnings or even lower.”

It’s actually happening.

Stock Market Crash 2020?!

The 2020 stock market crash came fast and furious! In about a week, the U.S. stock market has corrected 12%, while the Canadian stock market has fallen 9%.

Source: Ycharts with author annotation

Actually, I wouldn’t call this a stock market crash, yet. To me, a market crash is when the market falls 30-50%.

I know it’s scary to think that you can lose half of the value of your stock portfolio, but this has happened before and can happen again.

I’d visualize my stocks being cut in half periodically so that I won’t panic when it happens.

It’s a Normal Market Correction So Far

From time to time, it’s normal for stocks to correct 5-15% for whatever reason that may appear in news headlines.

Frankly, I welcome the decline as it was getting harder and harder to deploy money into the stock market. In case you haven’t noticed, the S&P 500, which is a proxy for the U.S. stock market, delivered total returns of 31.5% in 2019, which was more than 3 times its long-term average returns of 10%.

So, it’s only natural that the market is giving some of the gains back in a correction.

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Will The Stock Market Crash In 2020?

Summary

  • The U.S. stock market is near its all-time high.
  • Since 1928, the market has delivered negative returns in 4 out of 23 presidential years. So, a 17% probability.
  • The stock market crashing or not has little to do with whether it’s a presidential year or not.
  • Coronavirus outbreak is triggering a correction in the market.

The U.S. market trades at an all-time high. It has been a bull market for almost 11 years, whereas historically, whenever the stock market has appreciated for 10 years or so, there will be a market crash like the one we had in 2008.

Yet, 2020 is a presidential year. Some people believe that the market will continue to head higher until after the election because Trump will do everything in his power to keep the market up since he’s going for the seat again. And the U.S. presidential election isn’t until November 3. So, the market could go up another nine months or so.

Historically, in presidential years since 1928, the S&P 500 delivered negative returns in 4 out of 23 presidential years (17%), including:

  • 1932, during the Great Depression, the market was down 8%,
  • 1940, during WWII, the market was down 10%,
  • 2000, the Internet bubble burst, the market was down 9%,
  • 2008, a financial crisis from subprime mortgages in the U.S., S&P 500 declined 37%
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