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17 Mar 2020  (858 Views) 
Out of the box

How will the global stock market recover?
I like to give my views about how the global stock markets will recover. This will happen within the next few weeks.

Why did the stock markets fall? The trigger point was not the corona virus. It has been around for a few weeks, so it was a major factor causing the fear and uncertainty. But it was not the trigger point.

The trigger was the collapse of the oil price following the disagreement between Russia and Saudi Arabia about limiting the production of oil. Saudi Arabia retaliated by flooding the oil market, causing the price to collapse. That triggered the collapse of the stock market.

The collapse happened on 9 March 2020. That is on my 72th birthday. I will remember it for a long time.

During the following week, the stock markets around the world dropped by 30%. When there is panic, few people dare to buy. But there are many people who have to sell, out of fear, or because they cannot hold the shares that they bought on margin.

The drop in the share prices go beyond fundamental factors. This is how a bear market works. 

What will cause the global stock markets to recover? It could be the discovery of a vaccine or cure for the corona virus. But this will take time for its credibility to be established. It will not be the trigger.

The trigger will be an agreement between Russia and Saudi Arabia to resume the production cuts. The oil price will recover. The traders will rush to buy shares. The global stock market will recover.

When will it happen? It should happen within the next few weeks. Watch out for it.

Tan Kin Lian


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