Autumn Stock Market Crashes / Second wave

EdGasketTheSecond

Well the OP isn't the only one fearing a coming crash

NorthernJoe

Market crashes invariably happen due to unforeseen circumstances although it has to be said that the market was incredibly slow to react to the emerging risk in February. Many people who sold up then would have done very well provided they re-invested but in truth, how many could have imagined the rally that followed. 

We're all now familiar with the risks of COVID-19 and economic shutdowns. The probability of that is factored into the current market valuations. 

Indirectly further COVID-19 case rises could impact the market - major corporate failures/defaults,
CLO/retail property market collapse but given I've just listed all those off the top of my head these are unlikely to be unforeseen circumstances the OP is thinking about & something that cannot, at least in the short-term, be offset by more QE.

DiggerUK

MK62 said:

EdGasketTheSecond said:

Central banks increase gold purchases fearing financial crash, from June 2020:

https://www.forbes.com/sites/simonconstable/2020/06/12/central-banks-set-for-gold-rush--over-financial-crisis-fears/

...........Of the 150 central banks surveyed, 51 responded......and 20% of those said they would.....so around 10 out of 150.....hardly conclusive, especially when we don't know which central banks make up this 10, nor to what extent these banks will "likely increase their gold holdings". We also have no idea what the 99 who didn't respond are up to with their gold holdings, or really what the other 41who did respond are actually doing with theirs (other than not increasing them)

The Central Bank of Digger UKtopiastan didn't respond to this annual survey by the WGC, we thought it was a bit impertinent to tell you the truth. Sovereign secrets are sovereign secrets.
Anyway, the gold bugs have never put any significance  on the gold reserves in Digger Bank, which are not crucial to an appreciation of how we get out of this crisis anyway..._

Bobziz

I'm guessing not given this forum is about investing, but does anyone make use of the VIX ? Looks like it could have got you out of the markets on the 23rd Feb, although you'd be on your own in terms of getting back in. 

bowlhead99

Bobziz said:

I'm guessing not given this forum is about investing, but does anyone make use of the VIX ? Looks like it could have got you out of the markets on the 23rd Feb, although you'd be on your own in terms of getting back in. 

It's not particularly clear that looking at the VIX over the weekend of 23 Feb would have 'got you out of the markets' just because it picked that day to spike over 20 on the way to going up to 80+. 


If you look back at the weekly chart over the last couple of years, the VIX was at 24 on 26/10/18 which was a relatively decent time to buy into the S&P500, though not as good as when it was at 30 on 21/12/18.   When looking at it at a relatively benign level on 23 or 24 Feb it wasn't 100% obvious that we should have all dived for the exits (obviously more advanced charts than the above are available with moving averages and other metrics and whatnot, but not conclusive). People might have thought that 28 Feb, with VIX at 40 and S&P dropping below 3000 (10-15% below previous highs), might have been a decent time to take advantage of the market volatility and deploy more capital. The two weeks of losses that followed would have shown that to be a bad time to get in, and that it was with hindsight a good time to get out. 

'Buy when there's blood on the streets' is often a good idea and the VIX measures the market expectation of forward looking volatility, so when it goes really high there may often be bargains galore when people are fearful and reading negatives into all the headlines. As you say, the timing of when to get back in based on just looking at the VIX would have been a bit of a crapshoot, as it went up almost to 80, fell back below 60, and then went on to new heights before the calming measures of unlimited additional stimulus and more bailout loans were announced, and once people realised that we weren't all doomed, the bounceback or partial bounceback was pretty quick for a lot of stock prices.

We may still all be doomed of course, but the VIX is calmer at the moment. Similar levels to where it was at 24 February, but settling down to that sort of figure from higher levels, rather than rising up to that from lower levels. Now may be a great time to get out and avoid the pain of more lockdowns and adverse news; but the worst of what is already factored in by markets may not happen.  VIX is derived from S&P500 option pricing, and of course the S&P is driven by a relatively small number of key stocks; the markets changing views about the potential shakiness of those stocks' prices over the next month doesn't necessarily translate into the returns you might get from investing in other S&P components anyway.

coastline

EdGasketTheSecond said:

Well the OP isn't the only one fearing a coming crash

No idea about a crash but consumer confidence has slipped back to 84 and as low as March this year.
https://pbs.twimg.com/media/EgRcFsbUYAc2dsY?format=jpg&name=900x900
https://conference-board.org/data/consumerconfidence.cfm
Spotted this yesterday. 
https://www.macrumors.com/2020/08/19/apple-berkshire-hathaway-market-value/
https://markets.businessinsider.com/news/stocks/warren-buffett-apple-cash-52-percent-berkshire-hathaway-market-cap-2020-8-1029516028

London7766551

I think it will happen at some point next year now. Everything is artificial with money being printed and the full effect has not hit yet.

Sebo027

London7766551 said:

I think it will happen at some point next year now. Everything is artificial with money being printed and the full effect has not hit yet.

There's a cult following who are vocally convinced by this, many from visiting websites like this one: https://wtfhappenedin1971.com/ But, I'm not sure how much they understand what they are talking about, to me it's alot of repeating sound bites. 
This is an interesting video, alas I don't claim to understand half of what's being said: https://www.youtube.com/watch?v=K3lP3BhvnSo&t=122s

AlanP_2

London7766551 said:

I think it will happen at some point next year now. Everything is artificial with money being printed and the full effect has not hit yet.

What will happen next year? A 20,30,40,50,60,70% drop in global equity values?

Are you backing your hunch by shorting the index / indexes you think will fall?

DiggerUK

AlanP_2 said:

London7766551 said:

I think it will happen at some point next year now. Everything is artificial with money being printed and the full effect has not hit yet.

What will happen next year? A 20,30,40,50,60,70% drop in global equity values?
Are you backing your hunch by shorting the index / indexes you think will fall?

Shorting in the manner you outline is one such play to utilise. If that level of shorting is decided on by those worrying about times ahead I suggest gold is the short play to call.

Gold is the ultimate short..._