Over the past month or two, investors have had a great time in terms of investing. After the initial market crash at the start of 2020, stocks have now soared up over 25%. However, looking at the economic side of things, it has gone the exact opposite way. Businesses have closed earning no profits, and billions worldwide have filed for unemployment benefits. Airlines have suffered huge losses, whereas the government debt is soaring up to all-time highs. Though the stock market prices are rising currently, the economy is badly bruised. This has led to many investors asking the following question:
Are We Going To Another Market Crash In 2020?
American investor, Warren Buffet recently held a shareholders meeting where he talked about investments and views on the stock market. In May 2020, the billionaire investor told other investors that he made a mistake betting on airlines. As a result, he is now selling those stocks amid the coronavirus pandemic.
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In the meeting, he had a lot more caution in his voice as he spoke. This is what he said:
” You can bet on America, but you have to care about how you bet simply because markets can do anything. In October 1987, the market crashed by 22% whereas they closed the stock market for four months in 1914. After 9/11, they closed the market for 4 days. But nobody knows what’s going to happen tomorrow.”
In every general stockholder meeting, Buffet uses the terms such as Buy, Hold, Look Long Term, Don’t Worry, Don’t Panic. However, during the meet earlier in 2020, the investor seemed a lot more pessimistic. Looking at every decision and prediction Buffet has ever made, the stock market is all set to crash again in 2020. This is all going to mean a flat market which will easily send us down by 10% or 15%.
How Can You Protect Your Money From The Crash?
Though they are surging, stocks are going to have a much harder time going through October. There is the election risk hangover as well as a fear of a potential second wave of the coronavirus. Most companies have withdrawn their forward guidance earnings leaving the investors flying blind. Until the Q2 reports in July, nothing can be said about how the profits are going to be.
But there are ways to protect and earn some money during these turbulent times.
1) Options As A Hedge Or A Investment
- Covered Call: Selling the right to buy your stocks at a certain price and collecting a cash premium from another investor
- Protective Put: Buying the right to sell your stocks at a certain price by paying a cash premium to another investor
2) Positioning In Stocks Of Safety Sectors
- Consumer Staples: Companies that sell necessary products in household goods and personal items
- Healthcare: Services and facilities such as Real Estate Investment Trust (REIT)
- Utilities: Companies in regulated electricity and water
3) Buying Physical Gold And The Standard & Poor’s Depository Receipt (SDPR) Gold Trust
- Protection from stock market stress
- Store of value and inflation protection
- Strong long-term demand for central bank buying