Cashel Fund PLC – 2020 Investment Pitfalls
Cashel Fund PLC`s analyst identified 2020 as being a turbulent year for investors the unprecedented corona virus pandemic decimated the broad-based S&P 500 by 34% in just over a five week period. This marked the largest 30% bear market decline in history which was followed by a strong rally from a bottomed-out bear market to new all time record highs with the S&P 500 recovering to record highs within 4 months.
One constant in 2020 aside from the overall volatility factor has been that predicting short-term movements of the stock market with any accuracy has proved harder than any other times in recent history.
Cashel Fund PLC has advised its client base that crashes can occur anytime with very little warning. As an example, the Nasdaq Composite lost 10% of its value in a three-day stretch between Sept. 4 and Sept. 8.
Cashel Fund PLC`s award-winning Chief Trader James Alexander has listed below several reasons why we may see further crashes sooner. “It`s easy to make money in a bull market the value of service to our clients is to have the tools available to make sure we protect our client’s asset and ensure profits even in a bear market”
COVID 19 Resurgence
The most obvious reason for the stock market crash would be lock-downs and work restrictions in the US caused by a resurgence in COVID 19 infections. Although Donald Trump will refuse to shutdown nonessential businesses if another wave of infection comes state governors may choose to take that decision out of his hands and do just that.
One of the other challenges we face is the upcoming US elections in November. If Trump, were to lose Democratic Party challenger Joe Biden, has categorically stated, he would shut the country down again if advised to do so by top health regulators.
US Election Uncertainty
Election Day uncertainty could also tank the stock market.
Analysts like to know what’s going to happen months or years in advance. Right now, uncertainty in the US Elections could spell volatility in the markets. Joe Biden is leading Donald Trump by a reasonable margin in most of the elections polls. However, Biden’s lead has dropped following the Republican National Convention. We have the upcoming presidential debates which could turn the election results. If this where to happen we could well see fluctuations and corrections in the market.
4. Employment stimulas
Another risk factor identified by Cashel Fund PLC`s Chief Analyst Paul Whiteman is the fact that Capital Hill may not be able to pass another round of stimulus legislation. This stimulus included enhanced unemployment benefits, which where providing an extra $600 a week to approved unemployed beneficiaries. this expired on July 31.
Without these benefits and added protections for affected industries and small businesses, we could see a surge of defaults in loans, credit, and mortgage, delinquencies adversely impacting big and small financial institutions alike.
5. Automobile loan defaults
James Alexander Chief Trader for Cashel Fund PLC has identified one specific are that he is particularly worried and that is Auto Loans. Although the number of automobile loans is much less in comparison to the dollar amount of mortgages outstanding, we entered 2020 with auto loan defaults at their highest rate for 8 years. If we were to see automobile loan defaults increase beyond just sub-prime borrowers, some banks could find themselves in serious trouble
The Fed runs out of firepower
The Federal Reserve has taken quantitative easing to unprecedented levels after pledging to shore up markets and keep long term lending rates down. It’s very possible we’ll see the stock market roll over when the Federal Reserve stops or slows support.
The Fed has taken its federal funds rate as low as it’s willing to go to shore up the markets and keep long-term lending rates down. But there’s only so much they can do. Fiscal policy is in limbo right now due to disagreements between Democrats and Republicans.
Cashel Fund PLC advice if the stock market crashes again
Cashel Fund PLC chief trader James Alexander thinks a second stock market crash may be coming. Should another correction happen here are a few simple things he suggests you can do.
Reassess Your Investments
Reassess why you bought the stocks in the first place. Walk back through the fundamentals of why you bought into a company in the first place and make sure those reasons are still valid. It should be noted that you don’t need the threat of a potential stock market crash as a motivator to do this.
Have dry powder at the ready
Having cash on account as part of a balanced portfolio is key during a stock market crash or correction. There have been 38 corrections of at least 10% in the S&P 500 over the past 70 years, and every single one of these has been followed by a bear market correction. If your intention is to stay invested for the long haul, having cash at the ready during a stock market crash allows you to take advantage of under valued stocks that will certainly recover again.
Continue to add to your winners
If you bought a stock because you identified fundamentals that would increase the share price then it’s a smart idea to use stock market crashes as opportunities to add to your strongest picks the fact is that winners usually keep winning. Target companies that have sustainable competitive advantages during periods of panic and heightened volatility. Cashel Fund PLC has profited by using these strategies in all recent market down turns.