Out of the box Forecast - the global stock market will recover on 9 April
I posted a forecast - the global stock market will recover on 9 April 2020. It attracted a lot of interest. Several readers asked me to explain my forecast.

Here is my explanation.

I replied that my forecast was based on my crystal ball. I have an old crystal ball, which is older than me, maybe more than 100 years old. Being old, it is not very accurate, and not very clear. So, the forecast could be off by a few weeks or a month or two.

That was made in jest. Anyway, you should not be too rigid about the 9 April date. 

Here are the real reasons for my optimism:

a) I expect that Saudi Arabia and Russia will come to an agreement to limit the production of oil and to support the price. That decision will cause the price of oil to shoot up and the stock market will follow.

b) In a few weeks time,  the countries that imposed a total lockdown will announce that they have succeeded in controlling the spread of the virus. This is likely to be the case because (in my opinion) the corona virus was already quite widespread already and could not get much worse. The news should cause the population to feel relieved and the stock market to be positive.

c) There will probably be some news of success of some newly developed vaccines in combating the virus. This will give the reason to be optimistic.

I expect at least two of these three events to happen to cause optimistic in the global stock market and for a recovery. 

I have only one reservation. Maybe, it will take a bit longer than 9 April for the recovery to take place. In that case, I will blame my old crystal ball for the lack of clarity.

Some people think that I wanted to boost up the stock market because I am heavily invested in it. This is partly true. I believe that the meltdown is overblown and overdone. Indeed, I have uninvested cash that I had been investing during the past two weeks, when the market kept falling. I will continue to invest my remaining cash to buy the shares at the ridiculous low levels.

If I am wrong, I can afford to wait for the eventual recovery. I expect it to happen sooner, but if it takes a longer time, it will be all right. I am investing cash that had been kept uninvested for several years. This is the right time. 

Even if the stock market remained low, I have no need to sell the shares to realize the cash. Most of the shares that I bought have low price earning ratios, good dividend yield and have a discount on their asset values.

I have to add a few words of caution:

a) Do not borrow money to buy shares now. It is too speculative risky.

b) If you have uninvested cash, you can follow me and invest them

c) If you have already invested and are worried about the paper losses, stop worrying. The current low prices do not reflect the real value of the shares. Just ignore them.

Tan Kin Lian

 

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