Why It Won't Be Like March 2020 This Time

RieslingHawk
2022-02-24

As the title suggested, back in March 2020, the market experienced the quickest fall in a decade. The major stock market indices$S&P 500(.SPX)$$SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$$Invesco QQQ Trust(QQQ)$$DJIA(.DJI)$tanked more than 30% in a matter of 1 month. All these happened due to the Covid 19 crisis, which brought about a very short lived recession.

Fast forward 1 year later, we are seeing the stock market only reaching new highs, with the S&P 500 hitting 70 new highs record in year 2021.

Now many people would be thinking, aiya I should have just bought the dip in March 2020, DCA along the way. But, hindsight is always 20:20.

Back then, to counter the Covid 19 crisis from leading into a prolonged recession, the Fed has printed trillions of dollars to "save" theconomy, interest rates was kept to 0, the lowest in history.

Right now, it's not going to be the case. And bear in mind, I think this Russia Ukraine war is just a smokescreen for a bigger problem. No doubt the Asset Prices in the US is way too inflated due to an ultra accommodative monetary policy for the past 2 year. Housing prices are continuing to surge, rising about 18% Year on Year. Inflation at 40 years high I strongly feel it will go even higher, with a higher crude oil price as well as housing. 

All this will incentivise The Fed to tighten monetary policy much quicker. Raising rates more aggressively as well as shrink their balance sheet quicker. This is to curb the rising inflation as to speak. 

However, there's a much greater underlying problem. The US Dollars having depreciated quite substantially since the start of this year, meant that the World Reserve Currency is at risk. And The Fed will need to do everything they can to ensure that the USD does not fall behind China's CNY. Imagine if the USD is no longer a world reserve currency, China will easily overtake US. And right now, with the real yield of US treasuries, investors are scrutinising more. 

Buying the dip will not work this time. And the fall since 2022 is just the prelude of a long term bear market. 


In short - bearish on US marker, bullish on China Market. 



 


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Comments

  • vibzee
    2022-02-25
    vibzee
    Will crude oil prices hit a record high this year? Crude oil prices continue to rise, even if the Federal Reserve raises interest rates, how can the US CPI fall? I feel that the Fed is at a loss. Will the American economy fall into stagflation?
    • RieslingHawk: 
      Crude oil has hit a 8 years high. Right now, the US economic cycle is going into a downturn, raising rates now is basically committing suicide. But if they don't raise rates, inflation surges.
  • RoaringTiger
    2022-02-26
    RoaringTiger
    Agree with the analysis. Things need to come back down to reality. I just wonder when you say long term bear market, what is the time range when you say long term?
    • RieslingHawk: 
      Talking about at least 2 years to maybe even longer if USD does loses the World Currency Reserve status.
  • snoozii
    2022-02-25
    snoozii
    You got the point. I totally agree with you. As you said, the fall since 2022 is just the prelude of a long-term bear market.
    • RieslingHawkReplyzingle: 
      Well, don't bet against America. Historically that may be true but this time not so certain.
    • zingle: 
      Please do not bet against America ever.
  • Bi Han
    2022-03-03
    Bi Han
    Doesnt matter if your timeframe is 10 years. You will look back and laugh at this current event in our life. So just buy and live your life. Prices are so undervalued for many stocks as well now.
  • bubbly9
    2022-02-25
    bubbly9
    What assets should ordinary investors buy to cope with this crisis? Is it gold or blue chip?
  • whimsie
    2022-02-25
    whimsie
    That's true. The geopolitical crisis has had little impact on US stocks. The real impact is that the Federal Reserve decided to raise interest rates after implementing an ultra accommodating monetary policy for the past 2 years. Because of the previous policies, the inflation rate in the United States has risen sharply.
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