The Upcoming Stock Market Collapse Of 2020

What's up you guys? It's Graham here. So over the last few weeks, I've definitely noticed a concerning new trend within the stock market, and that's something worth addressing and discussing further. Because in the midst of record high unemployment, negative oil prices, an economy that still overall shut down, and a Connecticut man who broke into a restaurant and spent four days straight eating and drinking all of its supplies, I don't know why I mentioned that last one. I just found it oddly interesting.

Anyway, in the middle of all of that, we have two types of investors out there that I am seeing come up quite often. One is the type of investor that is in constant disbelief that the market continues moving up in price despite horrible earnings, bankruptcy filings, mortgage forbearances, and plenty of other bad news. So they're holding everything in cash because they believe once people actually get a dose of reality, the market is going to be coming crashing down even worse than in 2008. At that point, it's going to be the perfect time to cash in and print those ten-day returns.

Then, there are those who are just piling into the stock market right now because they see everything as just being a wonderful discount with pretty much no downside. There's really no strategy to it. It's just the assumption that we're down from all-time highs. "I'm buying everything into discount and things eventually have to end up back to where they were earlier this year." Oh wait, scrap that, the markets are up another two percent! "I could jump in really quick; otherwise, I'm gonna miss my chance."

Well, in both strategies, there's a problem. It assumes the markets are logical; it assumes the markets are accurate. And as we all know right now, absolutely nothing makes sense. We have some analysts warning us that we're on the brink of another stock market collapse and others saying that we're at the start of a brand new bull run. So in this video, let's go over some of the biggest mistakes that investors can make in a market like this.

We're gonna be addressing all of the articles out there talking about the upcoming stock market collapse, and then we'll go over the best strategies that you could utilize today to maximize your chances of coming out ahead of all of this profitably. We'll start this off with the current market update as soon as you shatter that like button. I don't recommend actually breaking anything, but you do want to just punch it lightly enough until it turns blue. If enough people do that, then maybe one day I will finally stop asking people to do it, but no promises.

Anyway, let's begin the video. Thank you! To start, I think it's no surprise that money, finance, and investments have been a main topic of discussion over these last few months and proves just how popular investing has become lately. It was found that finance and business news has become the fastest-growing category amid the crisis, even outpacing politics.

The stock trading app Robinhood saw record increases in deposits, with daily trades up three hundred percent compared to late 2019. And they're not alone. According to CNBC, which, by the way, has pretty much doubled its unique monthly viewers in the last month alone, says that other stock trading apps like eToro, which is pitched non-stop here on YouTube by Alec Baldwin and Raging Bull, saw similar increases in user activity as well.

So it's not surprising that during a time where our money is volatile, people are out of work, they're stuck at home, and they're looking for different ways to increase their income, they're turning to the stock market as a way to do so. Inevitably, that's likely to lead to problems later on down the line if and when things don't turn out as expected.

On that note, let's discuss the first type of investor: the one who's sitting on the sidelines in cash, just holding out, waiting for everything to come crumbling down in price and for the stock market to finally reflect what's happening with the economy. These all admit on the surface it makes absolutely no sense for the stock market to be trading at the same price as we saw in October of 2019, just six months ago.

We have people such as billionaire Jeffrey Gunlock who believe that stocks may very well drop back down even lower than before and that investors are way too optimistic about the current situation. We also have a CNBC survey which found that the majority of respondents felt like our economy wouldn't fully recover until 2022 and the economic impact might very well last even longer than that. But when it comes to that, here's one thing that always needs to be remembered, and that's just this: the stock market is not the economy.

Even though stock prices can be influenced by the unemployment rate, the strength of the business, and how confident investors feel in the future, it doesn't mean that the two will necessarily match one another. What happens with stocks and what happens with our economy can be two entirely different things. So in this case, even though our economy is not doing so well and so many people are out of work, we happen to see one of the strongest rallies since 1974, driven by, in my opinion, the speculation that maybe things are not as bad as we thought and the Fed is just going to print as much money as we need to get us through.

Okay, this type of thinking reminds me of the saying, "the market can remain rational longer than you could remain solvent." That just means that as much as you think something should go down, like the stock market should drop in price, the market can and will outlast how much money you have. For instance, imagine on Monday the entire market drops 10% in price. Rationally, we all know that not all businesses just lost 10% in value overnight, and a lot of that drop was caused by the momentum of panic.

But that type of rationality can and will last longer than you have money to continue betting against it. The same also applies with the opposite of that. If on Monday, all the markets go up 10%, we all know that nothing changed fundamentally overnight to justify every business being worth 10% more. That's gonna happen way more than you have money to outlast it.

So, logically, the best piece of advice for that first investor who's still in disbelief that the market has not gone down in relation to our economy is to first decouple the notion that the stock market is a reflection of how our economy is doing and realize that the market is completely irrational and sporadic. In a way, the stock market is not going to reflect what's happening today but instead what investors think is going to happen over the next few months or years.

It shows us that overall there is the assumption that things are improving and getting better with time. From that, the best thing that we could do according to all of the data ever analyzed on the stock market is just to invest consistently, buy, and hold long-term, regardless of what any of the news outlets say.

I think once we take a step back and realize, like, "Wait a second, none of us have any idea what's gonna be happening with the markets and no one can predict this," the best thing we could do is just say, "Screw it! I'm gonna stick with my plan, carry forward as usual, and come out ahead a more profitable investor."

But now, let's talk about the second type of investor who’s just optimistically plowing all their money into the market right now because things have to go back up to where they were before, right? And the faster the market moves up, the quicker they have to jump in. Otherwise, they might miss the gravy train. This is actually where I'm the most concerned right now because given the new recent wave of popularity towards investing and given the ease of being able to invest from your phone right now in fractional shares with as little as $1, I’m worried that maybe there’s a bit of an unrealistic expectation that just because something goes down, it has to go back up.

I just think that's gonna set a lot of new investors up for massive failure if they see their investments eventually drop in price or if things take longer to recover than they originally anticipated. Just because we've seen a massive drop doesn't mean we can't see another massive drop. It doesn't mean things can't just trade sideways for a while while your money just sits there doing nothing.

So given that, I think it's really important to set the expectation upfront that anytime you invest, you should invest knowing that no one knows what's going to happen. Everyone loves to guess and try to predict things that they have no control over, and the best guidance is just to buy and hold as long as you possibly can. Knowing that as long as you're diversified enough, eventually you're gonna come out ahead!

Profitable. Real talk everyone, that's the only investment advice I really truly stand by because honestly, no one can accurately predict what is going to be happening over the next one to three years. We can try to come up with rationalizations like "the market should be going down," "all the bad news is already priced in," or "the Fed stepped in to make sure things don't get too bad." That caused the stock market to bounce up, which caused a whole bunch of people to rush back in fearing that they didn’t want to miss out.

Savings accounts don't pay anything, so investing is the only way to get a positive return on your money. And now all of this irrational exuberance is driving the market more than actual fundamentals. But who knows? Because eventually, things will probably recover, and then by that time, we'll all have made a lot of money if we stay invested in the markets.

But again, as much as we try to rationalize things, the markets will be irrational. I would hate to see new investors burned if their investments go down in value or don't turn out as planned.

And a quick sidenote here—in terms of making money and beating the market, this is really surprising, and it proves my point perfectly—that everything is just completely irrational—it makes no sense whatsoever. But a study was just released, which found the best way to pick a winning stock is to find one with a cool ticker symbol. Yes, that is a serious article. Yes, I just lost my faith in humanity, and yes, it also kind of makes sense at the same time.

See, for anyone not aware, a company's ticker symbol are those few little letters you type in anytime you want to make a trade that correlates to a specific company. It's how, if you want to buy Ford stock, the ticker symbol for that is F. If you want to buy Apple, it's AAPL. If you want to buy Microsoft, it's MSFT, which I've always just seen instead in my head as this like a misfit. If you want to invest in smashing the like button, it's a ticker symbol—like just kidding.

But the issue with ticker symbols is that sometimes it could be really confusing. For example, if you type in Ford as a ticker symbol thinking it's going to be the Motor Company, Ford, well, you'd be wrong. Instead, that belongs to Forward Industries Incorporated. Or a recently popular one, let's say you want to invest in Zoom, you know, the video conferencing site. Well, that is not the ticker symbol Zoom like you would expect. Instead, if you want to invest in the real company, the ticker symbol is ZM.

So given how confusing and complex some of these ticker symbols can be, research has been done on easy to remember ticker symbols like Pizza, Wi-Fi, Cool Money, and X-ray to name a few. It was found that those actually did better than other companies. From 2006 to 2008, even those stocks generated an average return of thirteen point two two percent per year, with the total stock market index returning an average of only four point nine percent annually.

That was not a fluke either. This research was expanded from another study conducted from 1984 to 2005, which found nearly identical results. Not to mention, nineteen of the twenty-two companies with memorable ticker symbols did better than the overall market. Even though I think this is a horrible way to invest and make money, and I do not advocate people going out and buying Wi-Fi and then eating pizza to make money, I get why this is going on.

According to researchers, stock ticker symbols like this are easy to remember. It makes us more comfortable with the company; it makes us more likely to invest. Since most of us at our core are emotional beings, you're going to be more likely to invest in the companies that make us feel the safest—like investing in pets and pizza and x-ray—even if that means we're not the most rational.

But now in all seriousness, here's the main takeaway from this entire video just summed up in a few minutes:

One, I believe the biggest mistake is trying to time the market or believing something should happen just because the economy says it should. I think we all know that's not true, and the current state of the stock market right now is not a reflection of how well our economy is doing. We've got so many factors outside of our control, including the largest stimulus package in history. Not to mention, we have no clue how this illness is going to be impacting our economy long-term.

Do people return to normal after this? Does spending increase? Do people begin hoarding money? Are people continually gonna be out of work? There’s no one that could accurately answer that one except for just waiting and seeing what happens.

Now, number two: Don't impulsively just jump into things expecting a short-term profit. You do not need to time the market down to the exact week. Doing that is going to be pretty much impossible, and it's gonna make you want to pull your hair out. Instead, just slowly buy in, and that way, you're pretty much guaranteed to get close enough, and long-term, that's pretty much all that matters.

Now, I mentioned this before in a previous video, but a Reddit user named Josh Neide analyzed the last forty years of the S&P 500 and simulated three investing styles. Let's say Tiffany had the worst timing in the world and invested $200 a month in a high-interest savings account only to invest it entirely at every single market peak right before a crash. After forty years, her $96,000 investment turned into a $663,594 mini fortune.

At the exact same time, we also had Britney who had the perfect timing in the world. She saved her money and invested all of it precisely at the bottom of every single crash. Even though it would have been virtually impossible to time the market as well as she did down to the very day, her $96,000 investment turned into a $956,833 amount today.

And then get ready for it. We got slow and steady Sarah. All she does is set $200 a month to automatically invest in the stock market regardless of what the news outlets say and regardless of where prices are. Guess how much after forty years of doing that? She is $1,386,429.

This just goes to show you that with real data and real numbers, trying to time the market is horribly inefficient, and instead, it's best just to invest consistently and then do nothing for a really long time.

Three: Don't not invest for too long because sitting there waiting for a crash may not ever happen again. There have been articles coming out like this for years now, dating back all the way to 2013, calling for the next stock market drop. It just never happened. Just imagine reading one of these articles in 2013 when the S&P 500 was trading about $1,500 and then thinking to yourself, "Oh yeah, it's overpriced. I'm going to wait for the next drop, and then I'm gonna buy it even lower." Well, I guess in hindsight that would have been really stupid.

Overall, for the majority of people out there, in most situations, you're gonna be best off just investing a consistent amount of money every single week long-term than you would be holding all your cash just waiting for this magical rainbow of an opportunity to open up where it's like, "Here you go! This is your magical opportunity to buy in at the bottom of the market. Just put all of your money right here all at once, and then you could retire on a beach somewhere drinking a mai tai, just smashing the like button to the edge of the algorithm."

Because come on, I mean realistically that's probably not gonna happen. So when it comes down to it, the markets are irrational, and no one knows what's going to happen. When you see articles talking about the upcoming stock market collapse, the answer is: no one knows. It may or may not happen, but it doesn't mean we should change our investing strategy around it.

As long as you have a stable job and you have an emergency fund, the best thing you could do is stay the course and continue investing and holding. Our markets are all forward-thinking, so the sentiment right now is that things in the future should be better than where they are right now.

It's either gonna take a reality check that things don't recover or take much longer to recover than expected that will eventually bring us back down, where things just spring back to life one day.

For me personally, I'm not changing how I invest, but here is my prediction of what I think is gonna happen just so I could look back at this in a few years and see, "Do I have it? Do I have any clue what I'm talking about?" I don't know, but here's what I think is gonna happen.

I think it's gonna take a few years to economically recover from this. I don't think people are just gonna go and magically start spending their money again. I think everyone is gonna be very cautious over the next 12 to 24 months, and I think overall things are gonna slow down. Not to mention, I can't imagine businesses rehiring as many people as they were prior to all of this, and I wouldn't be surprised if many businesses just restructure how they operate.

And maybe, just maybe, someone can test out the theory of investing in really easy-to-remember stock ticker symbols like pets and money and pizza, and then just report back and let me know how they do. Just watch that be the top under-the-radar investing strategy over the next few decades. We'll look back on that and be like, "Why didn't we see it? It was so obvious! Just invest in pizza and Wi-Fi and money and pets! It was there all along; we overlooked it." Just watch, just watch.

So anyway, you guys, thank you so much for watching. I really appreciate it. As always, if you have not already destroyed the like button, make sure to destroy it as well as the subscribe button and notification bell.

Feel free to add me on Instagram; I post there pretty much daily. So if you want to be a part of it, feel free to add me there as well. On my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to watch a brand new video from me every single day, make sure to add yourself to that.

And lastly, if you guys want two free stocks, use the link down below in the description. WeBull is going to be giving you two free stocks when you sign up on their platform and deposit $100, with one of those stocks being valued up to $1400. So if you want your two free stocks, one of them up to potentially a lot of money, use that link down below and let me know which two free stocks you get.

Thank you so much for watching, and until next time!