Is a Market Crash Coming & Is a Recession Here? What You Can Do (2022)
Is a Market Crash Coming/Here?
Are you worried about a market crash? If so, you’re not alone. Many people are wondering if the stock market is due for another big drop. Unless you’re living under a rock, you would also know that the stock market has already dropped in the last few months from its highs.
Netflix (NFLX) has fallen over 70% in the last year, and it doesn’t seem like there will be any relief anytime soon as more people cancelling accounts continues to rise! Meta (FB) has also gone down 43%. Nvidia (NVDA) saw a decline similar to Meta. Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOG), dropped 23%-36% YTD.
Not to mention the brutal sell-off from Retail stocks like Target (TGT) and Walmart (WMT) this past week.
The market has been on a roller coaster ride! And it’s natural to wonder if another crash is around the corner. However, there’s no need to panic just yet. While it’s impossible to predict the future, there are several reasons to believe that a market crash is not imminent. And there is still hope.
First of all, the underlying fundamentals of the economy remain strong. While inflation is hot and the Federal Government is put in a tight spot to curb inflation, unemployment is low and the US economy is strong.
Secondly, stock prices have come down from their highs in recent months, making them more affordable. Legendary Investor Warren Buffett has been on a buying spree as well as several other hedge funds, such as Michael Burry’s Scion Asset Management.
Are We in a Recession?
“It’s the economy, stupid.: That was the catchphrase during Bill Clinton’s successful 1992 presidential campaign, and it’s as relevant today as it was then.
The question on everyone’s mind is: are we in a recession? And the answer is… maybe.
It’s hard to say for sure because recessions are technically defined as two consecutive quarters of economic decline.
However, we haven’t had two consecutive quarters of decline yet, so technically speaking, we’re not in a recession.
But that doesn’t mean we’re not heading towards one.
There are a number of indicators that suggest our economy is weakening, so it’s definitely something to keep an eye on. In the meantime, let’s all just be grateful we’re not living in the Great Depression. Things could be a lot worse!
If your 401k has taken a hit, if you’re worried about job security, and if you’re cutting back on spending, don’t panic.
What Can You Do?
So what can you do to prepare? First of all, make sure you have an emergency fund that can cover at least three months of expenses. Secondly, consider paying down debt and building up your savings.
And finally, keep an eye on your spending and make sure you’re prepared for whatever the future might hold.
Should you Buy the Dip? Dollar Cost Averaging is always a good idea. But it may not be the best time to go all out in Buying the Dip yet as the market is so volatile.
Are we in Bear Market? Is it a Market Crash? Is this the mark of the Recession? Will there be a bounce next week in the Markets? I don’t know.
What I do know is this. Investing is a rollercoaster journey. The people who lose are the ones who jump off on the way down.
But you know what most people don’t talk about also? It’s those people who hold onto every position they have and is waiting until it recovers.
While it may not necessarily be a bad idea to just HOLD sometimes. The pitfall of JUST holding is losing out on better opportunities.
If practically the ENTIRE market is down along with COUNTless solid companies, you’re bound to find some goldmine opportunities.
Warren Buffett once said… only hold onto positions you can leave unattended for a very long time (paraphrased). When the market is falling, these are the best times to cut your mediocre positions. The ones you have ANY kind of regret on. The mistakes that are hard for you to let go.
This is even more important if you’re trading options. Once you’ve cut out companies you’re unsure of, you double down on your highest conviction stocks.
These are companies with outstanding fundamentals that are undervalued. Sell put options on these companies so if it falls even more, you get an even bigger discount on these stocks. If it recovers, you simply profit from the Premiums.
Investing has taught me a lot in my personal life too. It takes a level of humility to let go of your losses and your mistakes. But it takes courage to double down on your strongest convictions.
And that’s how you’ll walk away from this even more wealthy than before. As always, invest safe and hang in there, friends. :)