Stock Market Crash 2.0: Do This Now!

There are a lot of investors predicting / worried about a 2nd market crash coming in 2020. In this video I want to go over the chances of this, what the metrics say and how to prepare...

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2020 we had one of the sharpest and quickest market crashes that we’ve ever seen. Stocks fell by 33% in just 1 month and investors were panicking big time… That is until the Federal Reserve, made the decision to print a lot of money, give it to the big businesses and to the people, which helped bail out the stock market. Right now stocks, are sitting around all-time highs at prices we’ve never seen before. This has left a lot of investors and myself included, asking the question is there going to be another stock market crash coming around the corner? And, if so, what do we do about this? That’s 2 very good questions that we’re going to delve a bit deeper into…

The first thing you need to realise is that just because market prices are at all-time highs, it does not necessarily mean that they are overpriced. To work out if they’re overpriced, you need to be looking at more than just 1 factor. Now one of the best ways to get a gauge, for if things are overpriced, is to look at the shiller p/e ratio…

The shiller p/e ratio is a valuation measure applied to the S & P 500. It is defined as price divided by the average of ten years of earnings adjusted for inflation. Simply put it’s a great way of measuring valuations for United States companies as a whole. I’ve seen a lot of smart investors who rave on about this metric. So let’s take a look at where it stands currently…

At the moment the shiller p/e ratio reads 31.47. So that’s a lot higher than the all-time historical average which is 17.1. It’s almost double…

Now I don’t know if you guys remember black Tuesday, which of course you don’t you weren’t alive then. But the shiller p/e currently is around the level that it was on that very dark day, where the market crashed… In fact the only time that the shiller p/e ratio was higher than it is today, was back in the technology crash in 2000. Apart from that the shiller p/e has never been higher.

Basically at least according to the shiller p/e ratio, the market has not been this pricey ever before apart from the 2000 dotcom crash.
So that is one indicator that points towards stocks been expensive. Another indicator that I’ve already mentioned before on this channel, is the Buffett indicator, which tells a similar story…

The Buffett indicator is currently sitting at 131.4%.
Anything above 134% is considered significantly overvalued, so we’re getting close to that stage in the market…

So prices are high, I think it’s pretty fair to say that. Another consideration, that should come into the equation is the national debt that we’re currently in. As of right now, the USA has $26.7 trillion dollars of debt on their balance sheet. So you need to ask yourself, how much more debt can they afford to have. Can they continue to keep paying stimulus checks & bailing out businesses if they’re already got so much debt on their hands. It’s just something to take into consideration.

Also corporate debt, is at all-time highs as well… It’s currently sitting at $16.8 trillion. So remember a stock is a corporation, so it’s the stock market that holds most of this debt. Now can those companies in the stock market afford those high debt levels. Well at the moment, it appears like they can.
But that’s because interest rates are at close to the lowest we’ve ever seen. 0.25% right now, they can’t really go any lower. But if they do go higher, which is basically the only direction it can go, well I think they’ll be a few stocks out there, that will be struggling…

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DISCLAIMER: It's important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.