I have been warning of a potential major market crash on HC for years but am starting to get a little bullish right now.
I dont think it is the worst thing to be holding quality blue chip stocks right now at this current level of 4816.6for ASX 200. I’ll give the logic below and also some counter points -
A/ BULL CASE -
1/ Stocks very oversold. A bounce / relief rally / dead cat bounce (at least) could be due
2/ Market seems to be pricing in absolute worst case scenario as it often does
3/ Markets were in any case due for a major correction and we have now had one
It suggests that the approximately 33% kneejerk reaction/correction is comparable. As per the article, the Spanish Flu was just starting to bubble up in 1917, with the deadliest month in October 1918, by which time markets had already shown a significant recovery. This is not uncommon and anyone following markets knows that markets are always ahead of the news. Keep in mind that the 1918 Spanish flu is one of the scariest comparable pandemics
5/ Even if markets do not recover as much as then, maybe at least, a good bounce is due. IMO, ASX @4816 might not even be the bottom and we could be headed for lower lows in coming months but maybe at least one good bounce is due in coming 2 weeks….?
Afterwards, maybe again a lower (final?) low as the Dow Jones made a bottom in 1917 itself?
Of course all this is just speculation, and I’m considering alternatives
6/ ASX @4816 means that we have gone back to the level from where we recovered after the recession in 2010. Does not much seem like a bubble at this level
7/ Massive stimulus packages from central banks around the world. Main factor keeping markets soaring all these years was central bank liquidity and there has been a flood of it now. And markets are at multi year lows!
B/ BEAR CASE -
1/ The unknown. This could of course be far worse than before. The fall so far has been bad enough to shake anyone up. None of us know how bad this can get
2/ High frequency trading, plenty of ETFs, derivatives, easy access to trading by retail traders etc. can cause far more panic than 100 years back. Also it could trigger other financial issueslike collapse of banks, etc.
3/ Crash so far has been comparable to the depression crash of Oct 1929. Keep in mind though that even then during Nov 1929 to April 1930, there was a massive 50% rally as severe bear markets have the most vicious rallies
So from both very short/ short term perspective, there is some possibility of reward
As I mentioned, I wont be surprised at all (in fact sort of expecting it) to see a lower low after a good bounce, but then if 1917-18 is a guide, then that final low could even be the bottom.
In a still worst case scenario, I’m asking myself if holding stocks for a year or 2, having bought them now around 5000 ASX (at levels of 10 years back)is such a bad deal….that is if stocks keep falling from here, and we have an even bigger crash. At present (at ASX 5000 levels), even holding long term does not seem so risky but yes, one has to analyse constantly.
I’ve tried to mix both bullish and bearish comments above, and considered multiple time frames for trading/investing. Risk/reward ratio does seem slightly more positive right now than negative
I’m even open to further hard falls but am wondering for above reasons whether anyone with a potential 1 year or more time frame has much to fear with buying stocks around ASX 5000. This is one of the main points to consider IMHO and keep in mind I'm open to further falls in immediate term
If anyone has read my comments over last many years, you would know that I’ve often warned of a major market crash. It is the first time in years, I’m starting to wonder whether it is time to be a little optimistic ...very cautiously optimistic.
Happy to hear any counter opinions. All IMHO and just a battler trying to make some sense of a crazy market. Please, please DYOR!
at this level
(20min delay)