The Bull Market Of 2020 | Did We Miss The Stock Market Bottom?

What's up guys, it's Graham here. So, the other morning it was really like any other. I woke up around 6 a.m., I went to the kitchen, I got myself some coffee, I sat down in front of my computer, I took a sip of said coffee, and then I literally spit it back out when I saw that the unemployment numbers saw a three thousand percent jump with six point six million people claiming unemployment.

And of course, the stock market reacts, in such a devastating day like you would expect it to, by going up in price by two point two eight percent. Like, I can't be the only one who finds that very odd, right? Well, for anyone who has watched the markets over the last few months, we all know that nothing makes sense anymore. Like, any time we see bad news, the stock market rallies in price because the news is not that bad.

And then when actual good news comes out, the stock market drops in price because now we don't have any good news to look forward to. Up is now down, left is now right, and the only people who seem to be making money right now are betting their life savings on SPY puts with Robinhood. So, that then lends the question: did we end up missing the stock market bottom, with stock prices acting so unpredictably now that we've seen quite a few price increases? Or is the stock market about to drop again now that things are somewhat panning out like we thought they would?

So, in this video I'm going to be dusting off my crystal ball and going over all of the reasons why the stock market should in theory continue going down. And then we're gonna be addressing the counterarguments to why the stock market should in theory continue going back up. And listen, I'm not gonna lie to you and tell you that I know what's gonna happen. Like, I'm not JP Morgan who tries changing their opinion every other day depending on what most people are likely to click on in a given moment.

It's that I'm gonna be giving you the full spectrum of each argument before and against it. I will give you my own opinion, and then I will let you come to your own conclusion. That way, no one tries suing me in case I'm wrong, because this is the internet. So, with that said, make sure to destroy the like button for the YouTube algorithm, be sure to comment down below and let me know if I missed any points of this argument or if you agree or disagree.

And of course, let's begin the video. Now, just a quick backstory here, and I think this goes without saying, but we've seen a pretty turbulent past few months. In the last 60 days, the markets have hit their all-time high, and then right after that, extremely quickly, had their worst quarter ever in history, combined with, as you would expect, some of the single biggest point gains in history around the exact time.

And now we're faced with nearly the entire world staying at home, businesses shutting down, people not working, and it's unclear how long this is going to last. Not to mention a nearly two trillion dollar stimulus package meant to help businesses and people in need, so that way they can help stay afloat during a time where otherwise they're not making any money. But where a lot of people want to place a focus right now, it seems, is on the stock market, which gotta make some sense right now because watching the stock market is a lot like watching the video game Pong.

One day it's up, and then one day it's down, and then it's back up again, and then it goes back down again, which makes a lot of people think, how long is this going to be going on for and did we maybe miss the stock market bottom? So, here are some of the reasons it should continue going down. First, this illness is still fairly new, and we're only a few months into it. So, many people argue that we still have not felt the effects of what's possible.

And a lot of these stay-at-home orders can last way longer than expected. There's still a massive supply deficit; it could take a while to ramp back up production, and a lot of businesses are not just going to spring back to life overnight. We also have to acknowledge that India's stay-at-home order is gonna have a big impact on our economy as well, and according to the prime minister, they're estimated to have a slow entry back into the workforce after their 21 days are up.

Which, by the way, I just want to say, the situation over there right now is really bad. I know this is a finance channel, and we speak primarily about investments, but their orders are pretty strict. And with such a large portion of their population living in poverty without any basic necessities, it's pretty devastating. So, I would recommend at some point going and Googling this, looking into it further—it's pretty bad.

Anyway, what I'm getting at is this: work in a lot of these emerging markets could completely come to a halt, and a lot of their businesses are not designed with the infrastructure to withstand something like this. If those businesses go under, it's a bit unpredictable about how that'll impact the rest of our economy and just how many people are gonna be out of work. The second, we also have to address unemployment, which just hit 10 million claims in the last two weeks.

Sure, some of that is temporary, and a lot of these people are going to be going back to work once their businesses open up. However, I think the kicker here is that once a lot of these businesses open up, they're gonna start seeing a lot less demand because people are not gonna be spending as much money, because they have bills and savings to catch up on. And because of that, businesses might not be as busy and not need to hire as many people as before.

Plus, I think a lot of businesses are gonna realize how efficiently they could operate with less overhead. And then I start to think, hey, wait a second, we don't need five employees anymore when we could just hire three and have them work a little bit harder. There we go. And those three employees are gonna be super happy to work extra hard and do the work of five because they're lucky to have a job right now in the first place.

Also, we face the very harsh reality that many businesses are gonna have to restructure the entire way they make money, or they're just gonna have to shut down if they run their margins too thin. It's a possibility that the stay-at-home order was just the final nail in the coffin for a type of business that can't run without a few months of income. And that's something we absolutely need to be prepared for.

So, even though there are loans and grants that businesses can take advantage of to retain their employees, some businesses just know they won't be able to survive for longer than a month or two anyway, so they would rather shut down and then not be on the hook for a loan that they otherwise would have to pay back if they don't meet the obligations. Third, even after all of this subsides, people are still probably going to be in a financial mess. They still have bills to pay, they're still gonna have to pay rent, they're still gonna have to pay their mortgage, and stimulus money is only gonna last for so long before people are gonna be on their own again and have to pick up the pace to make ends meet.

And at this point, it's unclear how quickly this is going to come or how soon we could go back to things being normal. I have a feeling this is gonna be a major setback for quite a few people, and because of that, they're not going to be spending money for a while while they build back up their reserves, pay down debt, and start building up that foundation.

There's also the argument that after this, people are not gonna be going out and eating out, they're not going on lavish vacations, they're not going in buying cars. Instead, they're gonna be hunkering down and saving money because that's the only thing they could do to ensure that they're not going to be in a vulnerable position financially. And fourth, we really have no idea how much of this is already priced in. But you guys have probably heard the saying, "Buy the rumor, sell the news."

Well, this is a bit applicable here in a way—the stock market doesn't care about what's happening right now; it cares about what's happening in the future. Like, we take the current price and we factor in what's most likely going to happen over the next few weeks. Then we go and price that in, and then anything that's better or worse than what we expected is going to be reacted to at that time completely randomly.

So, given that we've already seen a big wave of news that's potentially priced in, there's still the expectation that we might not have all the available information to us right now at our disposal. And this could really be just the tip of the iceberg in terms of what could happen that we didn't already expect. However, to counteract a few of these arguments, here's some of the reasons why the stock market could recover and continue going back up.

First, it's because JP Morgan told us so and they must be right. Okay, obviously that was a joke, but no seriously, one of the arguments that I see is that at some point a vaccine is going to be offered, people are gonna be returning back to work, and in a few years from now, this could be a thing of the past. So, that means from an investing standpoint, if you're investing money that you don't really need in the near future, it doesn't make a big difference if you invest right now or if you invest a year from now, as long as you just invest.

So, for anyone with that mentality, what the market is gonna be doing in the short term doesn't make much of a difference. Now, we know that's not an argument for why the stock market is only going to be going up from here, but it does at least help put it in perspective that long-term, it'll be okay. The second, the Federal Reserve has made it pretty clear that they're willing to do whatever it takes to keep the economy going at all costs. Even though some people are gonna want to probably put that in the "that's a really bad sign" category, it does make you think that if things ever get too bad, that the Fed is willing to step in, get more money into circulation, and do what they can to help stop the loss.

Now, maybe that could mean that they're just postponing the inevitable or putting a small band-aid on a much bigger wound, but either way, they want to soften the landing and make things much easier in terms of loss. The third, the markets have already dropped from peak to very worst by nearly 40 percent, which is not an insignificant loss by any means. This drop was during a time where outside of this event, everything was going relatively well—interest rates were low, people were spending, consumer confidence was high, unemployment was low. And when we take this out of the equation, not too much had fundamentally changed.

Now, obviously this illness has significantly impacted our economy at this point, and that's definitely gonna impact how people spend their money and how businesses operate for at least the next few months to potentially a few years. But some might argue that isn't a nearly 40 percent drop reflective of that change? The fourth, there was already a lot of bad news priced into the market, so what else are we seeing that we haven't already factored in?

Like, we knew unemployment was going to be really, really bad, and that's why I think when it came out that 10 million people claimed unemployment, a lot of investors thought, "Well, you know what? We knew it was gonna be bad; this isn't exactly new news to us, so we're going to be moving forward." Same thing could also be argued with pretty much any other source of information right now. We really got a lot of the bad news at the same time where a lot of this was unexpected, and that's when panic set in and people sold.

And then other people saw people selling, so they sold, which caused other people to sell, and then it was pretty much a mass selling spree. The fifth, anecdotally, and I say this purely from opinion, but it seems as though there's a lot of pessimism out there that the markets are absolutely going to be going down, and that kind of makes me think that if a lot of people are thinking this way, it's going to be less likely to happen.

That's because if everyone thinks the market's going to be behaving in a certain way, they're gonna take the precautions ahead of time to prevent that from happening in the first place. It's kind of like if I told you 100% that you are not going to be smashing the like button no matter how much I asked you to do that—100%, you're not going to do it. Well, guess what? Now that you actually know this, you could prevent that prediction from happening by just going and smashing the like button and then proving me wrong.

So, I think in a weird way this kind of also applies to this. If people have the expectation that the market is going to continue falling, then they're not going to sell anything that they haven't already sold, and in a way, that gives the markets room to go back up. Fun fact, but in physics, this is actually what's known as the observer effect. This is where the act of observing something or being aware of it diminishes its probability and accuracy of happening because now you have the ability to go and act on the signals.

So, in essence, getting a proper read and prediction of what's going to happen now is a bit like taking a shot in the dark. So, that leads me to my own thoughts, my own advice on this, and here's what I think. In the short term, I believe that betting either way is going to be the equivalent of flipping a coin—heads or tails. No one knows the full scale of what's to come or if it's gonna be better or worse than what we expected.

And I'm sure half the people out there who make predictions are gonna be coming forward saying that they were right and that they knew what was going to be happening because it just so happened to have worked out in their favor. That's not to say that we can't look at the economic data, try to analyze it, and then come to a reasonable and logical conclusion, but at the end of the day, we have no idea how the markets are going to react and at which point we begin going back up.

Like, if I were to guess—and just trust me, guys—like this is just a pure guess, I would say we probably go up and down in price within about a 10 percent range over the next few weeks or a few months, and then slowly we'll begin moving back up with more green days than red. But again, that's just a total guess, and I would not be surprised if things continue to get worse and the markets continue dropping further. Until then, I have a feeling we're gonna probably see a lot more volatility, a lot more unemployment, a lot of businesses shutting down, and things on paper looking worse.

But I think long-term, it's going to cause a lot of businesses to restructure how they operate. It's gonna leave way more room for error, and I have a feeling a lot of people are gonna find that they're way more productive working at home than they are going into an office. And from there, I believe that for a long-term investor, as in you don't need this money for the next five to 15 years, you're probably gonna be best off just buying every week—dollar cost averaging into the markets, buying the dips, buying the gains, and long-term you're gonna be perfectly fine.

And one more piece of advice for everyone out there that I personally follow that's worked really well for me, and it's just this: focus on what you can control and then ignore everything else. Like, here's some of the things you cannot directly control: what the price of the stock market is going to be next week, how long this is going to last, when is going to be the stock market bottom, what's gonna happen to the US economy, and whether or not I asked you to smash the like button for the YouTube algorithm if you've not done that already.

On the other hand, here are the things you can control: whether or not you actually go ahead and do smash the like button, whether you cut back with unnecessary spending, whether you live below your means, whether or not you invest consistently long term, whether or not you pay down any high-interest rate debt, whether or not you keep an emergency fund, whether or not you're over-leveraged with your investments, and whether or not you use your time wisely right now if you're at home otherwise doing nothing.

But really focusing on what you can control and then disregarding everything else gives yourself much greater power to make the most of each opportunity long-term without concerning yourself about what the stock market may or may not do in the short term. Like, if the stock market goes down right now, then fine, it's part of the process. Use that as an opportunity to continue buying at lower prices, knowing that long-term you will be okay.

And if the markets continue going up, then that's great because your investments are going up in value alongside with it! Unless you have SPY puts on Robinhood, in which case, I don't know what to tell you there. And of course, you have to remember that throughout all of this, prices will go down again at some point, and that's okay. So, don't ever be shocked if your investment falls in value and don't ever think that you're doomed.

And unless you're probably a late investor to WeWork, in which case, again, I don't know what to tell you. Just understand it's par for the course, and be rest assured that if you're investing consistently long-term, you will come out of it okay. And that's pretty much exactly what I'm doing. I make sure I'm not over-leveraged, I don't have any variable interest rate loans, I don't have any short-term loans, I keep a very large emergency fund, I live drastically below my means, I do my best to save as much money as I can, and then invest consistently with that.

And otherwise, I just continue carrying forward as normal. Sometimes I'll buy high and sometimes I'll buy low, but I don't concern myself with what I can't control, and I just invest consistently long-term. So, with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you've not already subscribed, make sure to destroy the subscribe button and the notification bell.

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So if you want your shot to get two free stocks, use that link down below. Let me know what your two free stocks you get. Thank you so much for watching, and until next time!