Category Archives: Market Outlook

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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This Stock Market Correction Is Triggered By These Reasons

Market corrections are scary. And who knows if this market correction will turn into a market crash with all the uncertainties in the global economies … Brexit, trade tensions, global growth slowdown, etc.

A Quick Overview on Global Economies

The European countries’ economies look like it could be falling apart with the unemployment rates in France, Italy, and Spain sitting at about 9%, 15%, and 10%, respectively.

Gross domestic product (“GDP”) is a monetary measure of the market value of all the final goods and services produced in a period of time.

Here’s a comparison of the 2017 GDP of the 3 countries:

2017 GDP of Spain, Italy, and France in a line graph

Germany and the U.K. are doing OK with recent unemployment rates of +3% and +4%.

2017 GDP of France, the U.K., and Germany in a line graph

Note that the combined 2017 GDPs of Germany, the U.K., France, Italy, and Spain was about 10.8 trillion, which was about 56% of the U.S.’s GDP. Still, if Europe’s economy falters, there’s going to be a ripple effect. Read More