Originally posted by: O2bnVegas
Agree with all.
Now...can somebody with finance background (certainly not me) explain effect of this on the market, why it tanked yesterday? will things recover (they have in most years), that kind of thing? I am asking in a general way, not defending Trump in any form or fashion. I know about the big companies withdrawing all support from, I guess, any polititian yesterday? Is that true? How does this influence the big investor?
Predictions, please, regarding the stock market. Thanks.
Candy
HI Candy,
In a former life, I was a stockbroker, so I know of whence I speak. I hope :)
First and absolutely foremost, I learned to never place any real significance on what happens to the market in a given day (or week, or month). I know the media LOVE to say "Dow drops 700 points on (whatever event)." Note the wording. They're not willing to say "because of," because they actually have no means to establish causation. Therefore, they choose wording that makes it look as if they're implying cause-effect while leaving them wiggle room if they get called out on it.
The reality is that a significant market move can be caused by any one of hundreds of factors. For instance, institutional investors (mutual funds, pension funds, etc.) could have an automatic "sell" (or "buy") trigger on a given day, and that could easily inject enough trading volume into the market to skew it for a day or two. Many if not most of these large trades are initiated by computer programs, not humans.
So the likelihood that Trump being booted out the door is the cause of the recent market drop is vanishingly small. Aside from that consideration, why would the market suddenly react negatively to Trump's loss of his precious social media megaphone? Why does that hurt any company, except perhaps Twitfool, Fakebook, etc.? And consider: if the stock of every one of the four major social media companies dropped to zero tomorrow, that would drop the Dow by about 1%. The market is too big and has too much inertia to be seriously affected by something that happens in a single sector.
Another thing every investor has to consider is that the stock market casino (that's what it is) is a rigged game. The other players know much more than you do. So maybe you anticipate some major event that you think will affect the price of a stock or stocks and invest accordingly. That event or potential event is already baked into the current price of the stock. This can also be said of the market as a whole. It's as if the sportsbook posted today's line, already knowing the outcome of the game, and you're trying to beat it.
So to answer your question, I predict that the market will gradually rise over the next six months as the economy reopens. However, it doesn't take a genius to figure that out. A LOT of money is sitting on the sidelines, and more stimulus money is coming in. Plus, people are all itchy itchy itchy to get out and have the fun they feel they're entitled to--and spend money.
So if I was going to invest in the market right now, I'd go with the travel and leisure sector. Look for some companies with sound balance sheets. (And BTW, treat anything to do with Vegas or gambling like it has the plague.) I have one specific tip for you: Camping World. They sell all things RV, including parts and service. RVing exploded in popularity this summer as a safe way to travel mid-pandemic. I think a lot of people got hooked (and BTW, you can't find a reasonably priced used RV in decent condition anywhere right now).
If you get rich, I want a cut. If you go broke, I never heard of you.
