Pre-Crash Stock Investing
Being a future-oriented market blog, we must explore investing opportunities coming down the pike. Of course this includes the opportunity to buy before market bubbles and market crashes.
This isn’t to say a stock market crash is imminent, but only that many corrections will be in the forecast. Knowing what might happen politically, economically in the globe, and with our pandemic crisis is enough to make us wary in 2021. And as governments try to bring their debt ridden economies back to life, there are perils.
Your 401k or RSP isn’t a trifling matter. This whole topic of stock market crashes runs deep especially if you’re trying to pick single stocks to buy. It’s a study of the monkey wrench that’s being thrown into the gears of the machine. If you understand this, you might come out of the downturns okay.
I hope you’re not believing that the inflated, bubble-driven number you see in your account now, won’t look very different 6 months ahead or 5 years ahead. How many so called successful investors and advisors were humbled during the last two recessions? Did they foresee both the last two recessions?
There’s any number of events that could ruin it, just like the last financial crisis did. The markets were flying in 2006 with no fears of disaster. And then it happened. The price earnings ratios aren’t has lofty as in 2009, but they’re the 2nd highest overall and inflated by stimulus.
Price to sales ratio on the S&P shows an alarming trend never seen before. The Price to sales ratio measures companies revenues to the price. As we can see, revenues are not keeping up and we’re well into the recovery now. Both price and revenues will grow over the next year, up until the big event.
Hot Topic for 2021/2022
Markets are peaking, but is everyone buying the right stocks?
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I’m sure most investors would agree that a stock market crash is just ahead, perhaps in a few years. But the arrival may be accelerated so it arrives within 1.5 years. 2023 is only 18 months away. You need to dig into hedging strategies and finding the best stocks to buy. Wise investors entertain new angles on stock market investment.
Even if markets don’t suffer a big downturn, there is the issue of stagflation, which plenty of economists are concerned about. Remember, if the globe gets hit by stagflation, it may impact the US. And with US spending the most, having the biggest inflation risk and the risk of high unemployment and stagnant GDP, this has to be take seriously.
Inflation is real enough with stimulus, consumer recovery spending, high energy prices, supply chain problems, interest rates to rise, and lingering high unemployment that may not come down for 2 years. As economies return to normal, will protectionism grow because that would raise unemployment and cut GDP.
There are politically-charged views of the crash possibility with neo-liberals believing the current US governing regime’s climate change fighting economic policies will win out. Yet we’re seeing oil prices climb crazily, debt mounts like Everest, a US Senate election in 17 months, record highs on the major indexes, and an aggressive China communist regime saying “they won’t back down.”
If US GDP does not soar in this regulated market, then more spending and low interest rates won’t save it. Suffice to say, there is a significant risk of a stock market crash within the next few years, such as when the Republicans regain office in 2022 and the 2024 presidential election. I’m not saying I dislike everything the Dems are doing, but it’s all so artificially-engineered, against the grain, that something is likely to go wrong. The Dems are juggling a lot of credit-driven economic balls while fighting greedy corporations. What could go wrong? They’re also ideologically driven which means when a recession hits, they won’t respond with good choices (lowering taxes and opening oil production). They’ll hit the wall and get de-elected.
In 2024, when the Repubs re-cancel the Dem’s high-spending policies, it could teeter the economy, although oil and gasoline prices will come sliding down again. My guess is President Trump will not return. He knows he made mistakes and it’s doubtful his wife will want to go through that again. Instead, voters will like a new Repub leader and will relax with Trump gone. It will be quite a fight though and should be an unnerving time for investors.
The US dollar could fall much further driven by stimulus funds and US inflation, the rise of Bitcoin, and Biden’s stubborn extreme policies.
You’re probably thinking that anyone intrigued by the matter of the stock market crash is frightened, pessimistic, and ready to sell at a loss. However, what if many investors are looking for ways to profit from a downturn or crash? It’s a big price change event that will catch others off guard. Wouldn’t that be a smart investor who might consistently make money off of a big rise or dip? And I’m not talking about short selling.
Certain stocks are bound to soar in these inflationary times ahead. These stocks will fly before the crash and if you don’t have them now, then you want to avoid them.
Bitcoin and Cryptocurrency stocks are a case in point. Right now their price is driven by hype and no fundamental value. Hypesters say it’s a certain thing that Bitcoin and Ethereum will ride through the next recession. But central governments need their own currency to manage their country’s economies. This is why each country such as China will create their own cryptocurrency and fuse it with their own dual and price fixed currencies. The US won’t have that luxury.
The collapse of a country’s currency’s value would have to be catastrophic. The volatility of Bitcoin could be even more extreme in advance of the next crash. Financial services firms and banks might be devastated in a recession where cryptocurrency comes into vogue.
The Experts Pre-Crash Stocks to Buy:
Investorplace gives their pre-crash stock picks:
- Duke Energy (NYSE:DUK)
- Bunge (NYSE:BG)
- Murphy USA (NYSE:MUSA)
- Kroger (NYSE:KR)
- Unilever (NYSE:UL)
- Dollar General (NYSE:DG)
- American Tower (NYSE:AMT)
- Johnson and Johnson (JNJ)
- Rite Aid (RAD)
- 3M (MMM)
- Altria Group (MO)
- Smith & Wesson Brands (SWBI)
- Lockheed Martin (LMT)
And Yahoo likes these recession resistant picks:
- Apple (NASDAQ:AAPL)
- Microsoft (NASDAQ:MSFT)
- Adobe (NASDAQ:ADBE)
- Procter & Gamble (NYSE:PG)
- Walmart (NYSE:WMT)
- PepsiCo (NASDAQ:PEP)
- Costco (NASDAQ:COST)
The Fool for their pre-crash picks selects United Health, Mastercard, Facebook, Google, Crowdstrike, Snowflake, and Twilio.
Are the Big Stock Market Gains Already Over?
The key point for you as a self-directed investor, is how you prepare for a potential market slide and possibly another recession. The knowledge of what may happen could give you an edge on other investors, you could benefit considerably by choosing the right stocks while they’re affordable.
For some long term investors, many stocks will survive the coming crash, but which ones might they be? We’re just passing through the Covid 19 recession and we witnessed certain stocks that performed well including Facebook, Walmart, Amazon, Netflix, Google, Microsoft, and Home Depot.
The next recession won’t be characterized by a pandemic. Instead, over-leveraged companies and Internationally exposed companies could be hit worst. Think of AMD and Intel and the microchip shortage. In a trade war that is almost certain to happen as the US sees its trade deficit hit $1 Trillion per year, and most stimulus simply being transferred to China (consumer purchases), the supply chains will be strangled.
Sectors that will do well in the next recession include food, utilities, healthcare, alcohol, do it yourself, and discount retailers.
Investopedia, advises in their guide to look for:
1. counter cyclical (not dependent on employment and consumer confidence)
2. not over leveraged (those with high debt to equity, and vulnerable to rising interest rates)
3. strong cash flow (big sources of revenue regardless of their debt)
4. not speculative (established companies, with stable earnings and less volatility)
US News reports 7 stocks that soared during the last two recessions:
NextEra Energy (NEE)
Dollar Tree (DLTR)
Home Depot (HD)
NASDAQ’s Recession Picks
NASDAQ says Roku (NASDAQ: ROKU), O’Reilly Automotive (NASDAQ: ORLY), and Costco (NASDAQ: COST) are 3 great stocks to buy.