We are at the start of a bear market. And most investors are in denial. It’s ridiculous how much denial there is. We just ended a historical longest bull market EVER , and now we must be in the longest ever denial-phase. It makes for bipolar markets, They feel uplifted and euphoric one day, and the next they crash and burn. It’s a transition before the bearmarket kicks in. I’ve been reading loads of info on stock markets writen back in 2008, .., just before the crash kicked in. The similarities with today are astounding.
Here’s how a bear market works in my opinion:
People in general have savings, say average 10.000 €/$/£. When the stock market go down , most of them sit still and sweat it out. BUT for some people it will hurt, because they were planning on buying a new car, house, dishwasher … So THEY pull out of the stockmarket and go in to cash.
, … , the stock can go up a little, but never makes up for those lost customers who changed stock for cash… Meaning the new ” high” will be lower than the previous one, ..,
After that it’s repeat, repeat, repeat. Only it will hurt MORE people every time, making deeper lows, until a stampede will go for the exit.
It stops when all the people who needed the money are OUT.
And that’s a loooong way down.
People act this way, but institutions do just as well. Pension funds at some point pull out the plug, because they are afraid to tank completely & losing too much savings. Even artificial intelligence and algorithms are no match for nerves of steel.
Now , today 7 january 2019, most investors are still snug and cosy. The stock market dropped a bit, but hey, it’s not too bad.A few clouds in the sky. and it’s getting a bit breezy. However the new “high” from last week will be shortlived, a high that looks a lot like a “dead cat bounce”.
Now in 2019 and 2020 there will be events that seem important and influence the stockmarket. Like trade wars, “geopolitical” tensions, Central banks making this or that statement. But that’s windowdressing. The bearmarket got started, now it’s looking for excuses to get going.
So let’s put numbers on it, since i hate forcasts like ” it might go up a little if it doesn’t go down” . Or involving China and emerging markets in the picture.
drumroll please! :
S&P500 on 1 july 2019: between 1950$ and 2000$
please comment, love to hear your opinion about that forecast.
*This isn’t advice where to put your money, it’s just my opinion on where things are going.
*P/E ratio’s today are are still high, and make a good excuse to exit the stock market.