Leo Tolstoy said, “All happy families are alike, but every unhappy family is unhappy in its own way.”
The same applies to bear markets.
Every correction, crash, or downturn has a unique catalyst and affects stocks differently.
In 2018, there was a weird little “sentimental correction” where stocks became volatile without much underlying risk. This was followed by a huge bull-run in 2019, once investors regained their confidence.
During the Pandemic, everything tanked — only to rebound sharply.
The current crash is different. It isn’t hinged upon a singular, speculative event. This time, the sell-off is based around long-term economic issues like inflation and rising interest rates. I think the downturn will last a while. Months, or possibly even years.
Actionable Advice And Predictions
- Right now, every sector and asset class is getting hammered. And if interest rates continue to climb, the sell-off will continues. The best short-term investments right now would be things you already need or use — non-perishable food, new shoes, a laptop, etc…
- Geoarbitrage and growing / raising your own food are also safe investments. Depending on where you go or what you grow, you could easily cut your expenses by 10–20% while maintaining a high standard of living.
- Quality businesses are on sale and dividend yields are up, too. As boring as this sounds, companies like Procter & Gamble are pretty safe bets if you’re looking for long-term income producing assets.
- Speculative assets will most likely suffer more, since much of their success is fueled by cheap leverage. While debt isn’t necessarily a bad thing, in fact it is the fastest way to scale a business, expensive debt can really hamper a company’s ability to grow.
- Well-managed companies with a low dividend payout ratio might be safer bets, but dividend growth might slow. Businesses that were compounding at 10% per year, might drop to 4–5%. This is just speculation, but it is something to consider.
- Covered calls are a great way to earn extra cash in a downward market.
- It’s always darkest before the dawn. All crashes seem cataclysmic when they’re happening due to fear of the unknown. This one is no different.
Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.