Autumn Stock Market Crashes / Second wave

sebtomato

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.
What's the best way to proactively preparing for it?
I understand that the US stock markets have fully recovered from the last crash, and are at all times high (tech bubble?).
However, in the UK and Europe, still about 20% below all times high.
At the crash in March, bonds didn't really do better than shares, so how to protect some investments (apart from keeping some cash?)

eskbanker

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Foreseeable events that are 'very likely' to happen would typically already be priced in by markets, it's generally surprises that tend to cause turbulence....

sebtomato

eskbanker said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Foreseeable events that are 'very likely' to happen would typically already be priced in by markets, it's generally surprises that tend to cause turbulence....

Given how high the US markets are currently, not sure they have factored in a second wave...or even the true impact of the first one. 

ZeroSum

sebtomato said:

eskbanker said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Foreseeable events that are 'very likely' to happen would typically already be priced in by markets, it's generally surprises that tend to cause turbulence....

Given how high the US markets are currently, not sure they have factored in a second wave...or even the true impact of the first one. 

A lot of the bounce back was driven by the tech giants, who have benefitted from the pandemic.

And any 2nd wave is currently just speculation. Much of the increase in cases are localised in areas that weren't previously badly hit. Northern Italy, is arguably now one of the safest places in Europe. My view is immunity is a lot higher than believed

masonic

sebtomato said:

At the crash in March, bonds didn't really do better than shares, so how to protect some investments (apart from keeping some cash?)

Really? They seem to have fared a little better, while generally having provided better returns than cash:

MaxiRobriguez

I don't think there will be another crash.

There may be a longer period of weaker performance in equities if cases continue to rise, vaccines aren't delivered within the next 9 months and further lockdowns are required, but you won't see the sort of volatility we saw in March.

I also understand why the US market is doing better than Europe - the same reason the Chinese market is doing well. Both US and China have huge tech companies who are improving their top and bottom lines throughout this crisis as people stay at home. The stock market is not the economy. The industries getting absolutely battered by Coronavirus are the ones that rely on footfall - transport, retail, hospitality - none of which hold enough weighting in indexes to justify such large drops we saw in March.

On another thread I went through some of the S&P500 companies starting by market cap, and it's only when I got to #24, Bank of America, did I find a company that would be >moderately impacted by Coronavirus. 

If you have money to burn then there's opportunities to be found closer to home with stocks that are still below their pre-Coronavirus peaks, which should come through this crisis OK, some of which are still paying decent dividends. You're not going to get a double bagger in a month anymore, but there are decent risk/reward opportunities still, should you care to look.

Prism

sebtomato said:

eskbanker said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Foreseeable events that are 'very likely' to happen would typically already be priced in by markets, it's generally surprises that tend to cause turbulence....

Given how high the US markets are currently, not sure they have factored in a second wave...or even the true impact of the first one. 

Investors will look at individual companies rather than just the index. Some of those largest companies which are able to move the index as a small group have been doing very well from lockdown and will likely continue to due to changes in peoples behaviour going forward.

If you take Microsoft for example, which is up 36% this year. They have been trying for years to encourage their corporate users to buy into Skype with some limited success. Last year they introduced Teams as a replacement and some companies were slowly moving over. This year that adoption has gone absolutely crazy. Companies that were using Skype are now signed up for Teams. Companies that had used neither are now setting up and using Teams. There were so many people moving into it that it stressed the Microsoft datacentres back in March and April and required certain temporary limits to be applied to other services. Once companies begin to work this way, they store data in Teams and its unlikely they go back. Each Teams user is an Office 365 user and requires a subscription and will continue to do so for years to come. This overall is a huge boost and has already been reflected in the numbers.

You could find similar stories for Amazon (retail, cloud, Prime), Paypal, Apple and others. These companies have pushed the US markets up almost on their own. Some of it is down to sentiment and could reverse, however some of it will be deserved and reflected in increased profits. 

Jim1980

I think the chances of a stock market crash are very low this autumn, even with a second wave. Central Banks have done so much QE or money printing that there is so much money in the system. Trump is also running on the economy he uses the stock market as a reflection of this so he will not let a crash happen in the USA, even if he needs his plunge protection team. The FED is also buying whatever is necessary to prevent a crash from happening, even zombie companies are allowed to survive. I think that when a crash does happen it will be more severe than normal due to the natural business cycle not being allowed to happen. 

OldMusicGuy

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.
What's the best way to proactively preparing for it?

Create a long term investment strategy and resist the urge to keep fiddling with investments based on what might happen?

EdGasketTheSecond

Second crash due around the US election in November.

If you believe it, then short the market. I think all asset classes will get taken down though gold less so than stocks and will protect you long-term.

EdGasketTheSecond

eskbanker said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Foreseeable events that are 'very likely' to happen would typically already be priced in by markets, it's generally surprises that tend to cause turbulence....

The markets aren't foreseeing or pricing anything in. They are completely disconnected from reality and inflated by QE and noobies gambling their stimulus cheques on the RobinHood platform. The party will only go on for so long and then......