Stock Market Forecast: Anticipating the Next Crash
Updated July 2023
We’ll utilize historical context to delve into stock market forecasts, emphasizing the importance of learning from history to avoid repetition. Reading the article can provide valuable insights for future decision-making, similar to our approach of gleaning wisdom from past market events.
Central bankers are embarking on a campaign against physical currency for a singular purpose: to penalize savers while favouring speculators, thereby dismantling the middle class. The strategy to maintain the facade of prosperity relies on persuading the ordinary citizen to embrace this illusory economic rebound. And what method could be more effective than compelling them to engage in market speculation?
The optimal approach to coerce savers into speculating involves imposing penalties on saving itself. This is precisely the course that central bankers have been pursuing, and the prospects are set to deteriorate further as global central banks adopt negative interest rates. Entreaties for elevated interest rates or aspirations toward them are divorced from reality; the era of higher rates is consigned to the past. The prevailing trajectory encompasses negative rates, and investors must either adapt or face insolvency—there exists no middle ground in this scenario.
Savers Penalized, Spenders Applauded
As the practice of imposing fees on savers for retaining their funds gains momentum, individuals will likely withdraw these funds and seek alternative avenues for investment. Some might opt to secure safes to safeguard their cash, while others may turn to investing in Gold. However, the majority will likely seek viable investment opportunities, and for many, the stock market will become the focal point. The rationale behind this inclination could stem from the fact that most investors are unfamiliar with the concept of hard money and fail to grasp that precious metals, in general, serve as a means to preserve purchasing power over time.
Even if these investors possessed such awareness, which is currently not the case, concentrating all assets into a single investment would be imprudent; it would be deemed reckless. Nonetheless, within this economic landscape, allocating a portion of one’s funds to Gold would stand as a judicious decision.
Quantitative Easing: Empowering the People
The general population holds a strong aversion to this market, displaying hesitance to invest in an environment dominated by themes of fraud and manipulation. Gone are the times when the Federal Reserve aimed to be transparent and leave traces of its actions. Nowadays, manipulation reigns supreme. Should the influx of easily accessible funds be curtailed, the ongoing bull market would abruptly cease, making way for a daunting and alarming downturn. This is precisely why the Federal Reserve will persist in its interventions. They will continue to inflate relentlessly, potentially to an infinite extent, unless met with a mass uprising. As we’ve previously emphasized, pinpointing when such an event might transpire is uncertain.
The masses not only slumber but exist in a profound state of unconsciousness. To rouse them from this state, a remarkable occurrence or a seismic shock is imperative. Therefore, if you envision resorting to prayer or indulging in wishful thinking, hoping that by singing “Kumbaya,” a sudden awakening will materialize, you are regrettably mistaken.
Fed has killed free market forces.
The Federal Reserve has consistently engaged in active interventions within this market, with their initial bold move taking place shortly after the crash of 1987. If the masses have maintained their silence for numerous decades, what leads one to believe they will abruptly awaken now? The practice of conjuring money into existence since the transition away from the Gold standard has been ongoing, yet most individuals today remain oblivious to this notion. If an attempt were made to reintroduce this concept, it’s likely that a substantial portion would resist. Accepting something beyond comprehension, even if it bears benefit, proves challenging.
To unearth solutions, one must first grasp the problem at hand. Presently, ignorance stands as a prevailing issue, closely followed by diversion. People tend to evade the actual predicament, seeking diversions to evade reality and inhabit the fanciful realm akin to “Alice in Wonderland.” In simpler terms, Quantitative Easing (QE) has not reached its conclusion by any means; it’s conceivable that, in certain cases, it might have just commenced. The objective behind QE was to infuse liquidity into the markets or, in straightforward language, to bolster the markets through the infusion of readily available funds.
Compelling Savers to Speculate
The Federal Reserve will effectively generate the equivalent of several rounds of Quantitative Easing (QE) in a single move. Countless billions, if not trillions, of dollars, currently reside within money market accounts, savings accounts, and similar avenues. A substantial portion of these funds is destined to flow into the markets in various forms.
Furthermore, a notable quantity of pension funds will be compelled to engage in speculative ventures, given the exceedingly meagre yields presented by treasuries. The fees charged by fund managers to oversee these funds will soon become untenable in light of these meagre returns. As negative interest rates take root in the United States, an inundation of funds will cascade into the markets, driven by investors fervently pursuing higher yields.
Widespread Acceptance of Negative Rates
Following Japan’s lead, Germany has become the second G-7 nation to issue a 10-year bond featuring a negative yield. In due course, each member of the G-7 alliance is likely to be compelled to tread a similar path. The available options are stark; resistance proves ineffective, leaving participation in the “devalue or die club” as the sole recourse. The yield on Germany’s 10-year bonds recently descended to -0.05%, marking a historic low, before subsequently rising to 0.2%. As this experiment unfolds, it’s plausible that rates could eventually plummet to the range of -3% to -5%.
“This auction is a symptom of what we are seeing globally,” said Orlando Green, European fixed-income strategist at Credit Agricole. “We are in a positive market environment for bonds right now, and investors remain relatively long German Bunds.”
“It would be the icing on the cake for investors who have come to accept that you do not get money back on your investment,” said David Schnautz, an interest rate strategist at Commerzbank, referring to a negative yield at the German auction.
Even countries facing significant challenges, such as Italy and Portugal, are able to issue bonds at remarkably low rates. While these rates might not be in negative territory, it’s worth noting that not too long ago, both these nations encountered considerable difficulty in selling their bonds. Presently, investors are displaying an interest in their relatively riskier bonds, drawn by the appeal of marginally higher yields. It’s conceivable that, over time, these two countries could reach a juncture where they can issue bonds with negative yields.
Stock Market Forecast: Concluding Insights
Your inner instincts strongly urge you to anticipate an imminent crash in this market, prompting you to avoid it at all costs. However, this approach hasn’t yielded favourable outcomes, has it? On the contrary, the market continues to surge to new heights while you persistently pose the same question and reinforce it with recurring answers that might seem simplistic. In reality, what merits your attention is observing the actions of your friends and neighbours. If their sentiments align with yours, it’s an indication that your stance might indeed place you on the unfavourable side of the market. While we don’t intend to come across as harsh or unfeeling, it’s essential to recognize that the market operates devoid of mercy or sympathy.
Markets Don’t care about Stock market forecasts or predictions; focus on the trend
The market remains indifferent to meticulously researched and logically constructed arguments; such reasoning proves ineffectual within the realm of markets. The sole determinant that holds weight is the side of the equation that the masses, often referred to as “lemmings,” align with. According to Mass Psychology, a market is unlikely to crash if the prevailing sentiment among the crowd is one of anxiety. Over the span of nearly eight years, this collective sentiment of anxiety or fear has persisted.
Has the market indeed experienced crashes? Some might assert this, but in reality, these so-called crashes transpired primarily for those who entered the market at its peak. Remarkably, such instances served as opportunities to buy, a fact evident when those who bet against the market (the bears) learned a costly lesson. On every occasion, the market recuperated all its losses and surged to unprecedented heights. If you persist in repeating the same actions with the hope of achieving a distinct outcome, we can only convey one message: There’s a term for such a pattern, and it’s known as insanity.
A Stock Market Disaster: A Chance for the Astute Investor
It’s crucial to comprehend that the era of experimenting with negative rates has only just commenced. Reversing this trajectory isn’t an option, and this endeavour will persist until external circumstances compel central bankers to halt. The timing of this cessation remains uncertain, as does the trigger that will prompt the Federal Reserve to cease these actions. During this interim period, the markets are poised to ascend significantly. If you choose to persist with your customary arguments or heed self-proclaimed experts who offer opinions like penguins, the outcome will likely remain unchanged: a blend of frustration and financial loss.
Alternatively, you can adopt a fresh mindset and acknowledge that until the masses wholeheartedly embrace this bullish trend, it will continue to steamroll over anything in its path. A practical approach involves assembling a list of stocks that align with your preferences. Then, bide your time for market corrections of varying degrees, ranging from moderate to substantial, before initiating new positions. The extent of the pullback directly correlates with the scale of opportunity. This principle will remain relevant until the masses wholeheartedly adopt a bullish perspective. Amidst potential market manipulations, an underlying trend persists; identify and follow this trend, as it’s your ally, while everything else tends to work against your interests.
Shifting Focus: Stock Market Forecasting Beyond the Crash to the Realm of Opportunity
Originally published on August 9, 2016, this piece has undergone multiple updates, with the most recent one occurring in July 2023.
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