Friday , 1 December 2023

These 2 Possible (likely?) Worst-case Scenarios Would Result In A Crash Of Epic Proportions

Automatically receive the internet’s most informative articles bi-weekly via our free bi-weekly Market Intelligence Report newsletter (sample here). Register in the top right hand corner of this page.

…Historically, the Autumn months have been especially dangerous for the stock market (think October 1929 & 1987) so, this fall, investors need to be prepared…[in the advent that]…President Trump fails to win re-election or a second wave of COVID-19 overwhelms the country…[because, were] either of these events to materialize, we believe that the stock market could face another crash of epic proportions.

…It is almost as if investors are convinced that the economy will recover to its former glory days, but those glory days were already in jeopardy before COVID-19 even came along. This is the mindset that is driving today’s stock market, however, and for those of us who can see beyond the next bend, we know what is coming and it is not going to be pretty. That is for sure.

Investors are living in a fantasyland, expecting that no ill could possibly befall the stock market while the Federal Reserve keeps pumping money into an already overblown bubble but that is a rather shortsighted view of how markets work, when left to their own devices, and is void of any fundamental analysis.

It is obvious, to us, that all understanding and acknowledgement of economic fundamentals, and their impact on stock prices, have been replaced with a myopic and dangerous view of the equity markets as a financial game parlor where you place your bets and hope for the best.

There are two particularly important factors whose outcomes have the potential to dramatically affect stock prices as we move into the Autumn months.

  1. The first is a defeat of President Donald Trump at the polls in the November 2020 election.
  2. The second is a resurgence of the COVID-19 pandemic, causing potentially devastating health and economic effects.

While no one can accurately predict events like these with such a variable outcome, it does make sense for investors to factor in the possibilities for these two scenarios when assessing the investment landscape going forward…

These two factors will ultimately determine the direction of stock prices…[so] investors need to prepare for either eventuality; perhaps by raising cash or hedging out a long exposure to equities.

Investing in the stock market is all about managing risks.Now is NOT the time to place huge bets either way, but a time to think about scaling into and out of positions as market conditions warrant…

It is up to each individual investor to assess their own tolerance for risk and to build a portfolio, accordingly, especially as we approach what is typically a weak seasonal period for stock prices.


Remember that September is a quad-witching month and October options expire on the 16th of that month, just one day after the Ides of October.

Stay safe, be well and invest wisely.