How To Know When The Worst Is Over

How To Know When The Worst Is Over

almost 4 years ago2 mins

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Stock markets around the world have now enjoyed a month of more or less constant declines, leaving investors wondering how low things can go – and how they’ll know when the worst is over 🤔

What does this mean?

According to one analyst at the Royal Bank of Canada, things may get significantly worse before they get better. If the example of 2008, the last time US stocks entered a “bear market”, is anything to go by (check out our dedicated Pack on what exactly that means), the US market could have another 28% to fall before things pick back up again.

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Goldman Sachs is slightly less pessimistic, predicting that the US S&P 500 will bottom out at around 2,000; in other words, US stocks “only” have another 17% to drop. But the investment bank’s experts agree that recession in many of the world’s major economies this year now seems a given 😖

One influential analyst at Societe Generale, meanwhile,** **recommends looking beyond stock prices alone to figure out when things are about to turn – and at gold in particular. The shiny yellow metal’s price also fell at the beginning of bear markets in 2000 and 2008, only to recover sooner than US stocks…

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Why should I care?

It’s interesting to note that stock markets outside the US haven’t hitherto enjoyed a golden decade – in fact, they’re actually lower than they were 20 years ago.

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But while the US market remains the center of attention for many investors, the past performance of any investment is – as the old (and true) adage goes – no guarantee of future results.

What goes down should, eventually, come up – and there’ll be a big buying opportunity when that happens. But attempting to time the markets is a risky business – especially with a global pandemic bringing to an unpredictable end a record run for US stocks built on enormous amounts of debt. For now, the only certainty is uncertainty… 🔮

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