Prognosis For The Stock Market

What will be the influence of the US Presidential election, Brexit, and vaccine availability on the economy? This is the prognosis for the stock market in 2021, 2022, and 2023.

1. US presidential election 2020 Prognosis

How will the US market react after the election?
What are the markets with the best chances to invest in at the moment?
Which growth may you expect within the next 2 years?

2. Brexit Forecast – Prognosis For The Stock Market

How will the European and British markets develop due to Brexit?
What is a promising investment strategy until the execution of Brexit?
What are good investment chances?
Which growth may you expect within the next 3 years?

3. Vaccine Availability – Prognosis For The Stock Market Reaction

Why does it take so long to make a vaccine available?
How will the markets react to a vaccine availability?
How to make a vaccine available for anyone?

4. 2nd Lockdown in Germany

Why the second lockdown in Germany?
Why Kanzler Merkel could make a vaccine available, and why Trump cannot do it?

It was an almost full moon night, and due to that, a lot of people cannot sleep. Do you know this problem? I know it pretty well! Because I am one of them. The night ago, I woke up at midnight and had the following thoughts about the major factors, that will influence the international stock markets, and I expect the following scenario:

3 to 36 Months Prognosis For The Stock Market Development

 

1. The upcoming US presidential election 2020 Prognosis

It is only 4 days to go until the presidential election in the US. This creates a lot of insecurity in the market, even if it is pretty clear how it turns out. That should give already a certainty. But it doesn’t calm down the volatility yet. Due to the fact, that Biden will not win because people vote for him! They will mainly vote against Trump. Because they are sick of this cowboy. The new president Biden is not known very well, yet. And due to that, the investors don’t know what to expect from him. Especially economically, for which the majority of the Americans consider Trump more competent.

He actually started the second cold war. But not against the Soviet Union. The Russians do not play a major role in the world economy anymore. This time it is a trading war against China. So, looking back in history. The first cold war between the capitalistic west and the communistic Soviet Union provided us with a long politically stable situation. This turned out into a long peaceful period.

How will the US market react after the election?

During the period of the cold war, the world economy wonder took place. Due to a strong competitive situation, both sides played out to their fullest. This created tremendous worldwide economic and technological growth. Just think about the first dog in space, the first satellite Sputnik, the first cosmonaut, the first moon landing. If the second cold war goes on, a similar politically stable situation will be created. And this competitive situation between China and the western world will create faster technological development and economical growth.

Because Trump loves to fight, most Americans consider him a better choice for the second col war. What will happen with Biden? We don’t know. That’s why we see the volatility. And it will go on for a while. At least until Biden has shown, what he stands for. As soon as he earned the trust of the people, what I expect within his first 100 days being new president, markets will calm down, and volatility will decrease, and a long recovery phase will follow.

Which growth may you expect within the next 2 years?

Looking across the major industries in the US, the energy market is down more than 50% from its last year’s high. That means recovery to the old level will be a 100% growth. And I expect that to happen within the next 18 months. That’s why I am invested in a US Energy ETF (Exchange Traded Font) with about 1/3 of my assets. I have no doubt, that the Yankees will resume the former energy consumption, as they did before the lockdown, as soon as the lockdowns are released.

XTR.(IE)-MSCI USA ENERGY REGISTERED SHARES Prognosis For The Stock Market

Even if the energy mix, will shift slightly from oil to alternative energies. But the renewable energies are also represented in the energy ETF. And with the growth of those energy sources, they will be weighted higher in the ETF as well. Actually, the drop of this ETF is currently bigger than the drop we can observe for Crude oil. That’s why I prefer the ETF instead of an oil ETC (Exchange Traded Commodities).

2. Brexit Prognosis For The Stock Market

At the end of this year, the United Kingdom will turn into the Separated Kingdom! At least in terms of being divorced from the European Union.

How will the European and British markets develop due to Brexit?

Currently, the EU and the UK are negotiating the trading conditions for the future, after the execution of the Brexit. And as long as this is not finished, we will also see high volatility in Europe. Especially in the UK, there will be a lot of volatility in the markets, at least until a trading modus is defined.

What is a promising investment strategy until the execution of Brexit?

My best strategy at the moment is to play the volatility game, by observing the bandwidth of the volatility. And I place a pair of orders. I place a buy order a little bit above the lower edge of the bandwidth. and I place a sell order for the same amount of shares, below the upper edge. So, with each swing within that volatility band, you earn about 80% of the volatility bandwidth. If the index moves between 1,000 and 1,100 points, you gain about 80 points, which equals 8% of the invested amount, each time the pair orders got executed.

As soon as the first order got executed, you double the number of shares for the second one. Let’s say, the order at the lower edge got executed, and bought 100 shares. By doubling the sell order at the upper edge to 200 shares. Doing this, you will switch from a long to a short position, as soon as the stock price gets near to the upper edge.

Of cause, you can only do so, if your broker and depot allow, to open a short position on the chosen asset. The same is required, if you are not invested yet, and want to put your initial sell order at the upper edge. After this sell order to open a short position of 100 shares near to the upper edge,Β  you set up a buy order at the lower edge, for twice the amount of shares, equals to 200 shares. That will cause a switch from short to long positions, as soon the stock price moves near to the lower edge. This is pretty uncritical. In the worst case, you might have to wait patiently. Because even if it will fall dramatically below that level, the markets will recover always! You can be pretty sure, to get your value back, at some later time. The only challenge is, not to sell with a loss, due to a lack of patient during that period.

Latest by mid of December 2020, I would stop switching from long to short at the upper edge and to close existing short positions, to avoid holding a short position for the FTSE. Because by then, the conditions of Brexit will be clear and then, first of all, volatility will be lower. And the market will start to recover towards old levels from 2019 and above. Due to that, the lower edge might not be touched for a long time. And you may get stuck in a short position, while the market is booming. Not a very pleasant situation, because, that boom will take several years.

A short position is basically selling borrowed stocks. Plus you have to pay interest to the one, who lent those stocks to you … and he wants to receive his dividend, as well. And guess, who’s gonna pay the dividend? YOU! So, it is good idea to make sure, not opening a short position in a stock, that pays a high dividend a short time before the dividend got to be paid.

What are good investment chances?

ETFs of indices like FTSE 100 for the British market are candidates to play this volatility game. Personally, I rather like to go for technological indices, like TecDAX. Because technological indices have higher volatility. If you would gain 5% on the DAX volatility, you could earn 8 to 10 % on the TecDAX, for each pair of executed orders. Gold is a good counterpart for that. And you can play the volatility game with gold on the other side, in the other direction. Because during times of rising the global markets, gold goes down. And the other way around. If you observe that gold and the global markets move in the same direction for a week or two, one may expect a trend change. Then I close the positions, to avoid an unpleasant surprise.

LX.IF-L.CO.MORN.UK NT Prognosis For The Stock Market

Which growth may you expect within the next 3 years?

Currently, FTSE is down about 30% below its all-time high in 2019. The question is, how much does it need to go up, to reach its old level? 45%! And I expect that it will reach that within less than 2 years. I even expect that the UK market indices will exceed their old hights by 30% within 3 years. How much gain will that be? 58%! Not a bad expectation for a period of only 3 years. Why am I so optimistic about that?

Well, the UK will come to a situation similar to Switzerland. Not having to ask the European Union, how to do this and that. This flexibility will be used, adapt faster to new market conditions than the slow-moving European Union. Where everything needs to be discussed and consented between all member countries. Only after that, the implementation in the individual countries can start. Which can take years.

Observing that, the UK can already analyze the European Union’s decisions, and find a way, to do better, and implement it much faster. As the Swiss do it for ages. Without a time-consuming process, they benefit from the slowness of the EU. The UK will become a second Switzerland, apart from the fact, that the UK which is more traditional and conservative. That’s why I expect, the UK not to play as smart as the Swiss. But still, due to their bigger market volume, their power and influence on the market will be much bigger than the Swiss dwarf.

3. Vaccine-Injection Prognosis For The Stock Market

Every day we may expect the announcement of the release and availability of a vaccine. But, I have a hard time understanding, how long it takes to get approval for the candidates.

Why does it take so long to make a vaccine available?

Governments stick to old regulations, that make the process for this approval long and expensive. While watching thousands of people dying. And at the same time, they are trying methods, which created the problem, to solve it!

Albert Einstein already expressed it so nicely:

“The definition of insanity is:
Doing the same thing over and over,
and expecting different results.”

What do I want to say mentioning this? The US claims, that it got hit the worst. Now they try with increasing hygienic standards to fight the virus. But, they are one of the countries in the world, that already have one of the highest hygienic standards. Here in Asia, the hygienic standards are much lower, but in most of the countries here, it is not really a problem. You wonder why? High hygienic standards weaken your immune system, low hygienic standards train it! Now, the response to the virus is, to increase the hygienic standards. But over exceeded hygiene caused the lack of a natural defense mechanism. So, over a longer period of time, it will increase the likelihood to catch an infection, and not only the currently best-known one! But coming back to the availability of a vaccine.

How will the markets react to a vaccine availability?

As soon as this is announced, the market will react, and it will know only one direction. I expect a slow recovery in the western world, about 20 to 30 % above the old all-time highs from 2019 within 2 to 3 years. And fast growth in Asia. Here, I expect the majority of the Asian markets to double within 1 year.

Why will Asia be so much better? Because they are so optimistic! It is a pleasure to see, how much construction work is going on presently here in Bali. The reaction to lockdown in Bali for most businesses was: Let’s renovate, or increase our capacity. And make the best use of the time, in which we have none or little tourists, to be prepared for the future. Instead of that, in the western world, they already worry, that the ramp-up will not be a smooth one. Sorry to say that, but I think the west is completely brainfucked! And due to that, they will not benefit from the crisis as much as Asia. For Asia, I expect a blooming future. Here, they keep going slow if the business is booming. And they keep going continuously, even if the business is running slow. Now, coming back to the long approval process.

How to make a vaccine available for anyone?

Why cant the governments change the regulations for it to make faster progress to make a vaccine available? There are a lot of vaccine candidates available already, and they do small field testing with them. How about making a really big one? Why cant the vaccine candidates made be available to everyone, who is willing to participate in a field test? “Oh my goodness, we cannot produce that much vaccine!” But, that is not required.

If there are more participants than the available vaccine, all of the additional participants get a placebo. This is anyway the method, of how medicine gets tested. If no one knows, if he got a real vaccine or placebo injected, people still think, that they are immune now. And thanks to the placebo effect, 30% of the people, who got the placebo will be immune. And those who got a real vaccine will be immune by an even higher percentage. After 1-2 months we will see, which of the real vaccines created the best immunity. And then, this vaccine may be given to everybody who still fears an infection.

4. 2nd lockdown in Germany

This has not a big global impact, but it touches me personally, because of being German. Du to increasing infections, restaurants, pubs, and bars have to close during November, to decrease the number of contacts.

Why the second lockdown in Germany?

Our Kanzler Ms. Merkel rectifies the unpopular decision with a safe Christmas and the perspective to celebrate it with relatives. I wished Merkel could initiate a big field test of vaccines, as described above. Due to the fact, that she does not want to be nominated as a candidate for the next election anymore, no one can blame her to do so just for doing this for election propaganda.

Why Kanzler Merkel could make a vaccine available, and Trump cannot?

Trump, from whom I expected, that he would announce the vaccine availability before the election. But he surprised me, by showing how well he survived his infection. In doing so, he presented an example, that the virus is not that dangerous.

Actually, how likely is it that the president of the US gets infected? And especially during the late phase before the election. In which any kind of attention is beneficial to win the election. To be honest, I think this was a complete theater and staging. The likelihood is so small because his bodyguards probably did disinfect anything and everyone he possibly could get in contact with. So, either my theory, that higher hygienical standards do not protect you from getting the virus is true. Or, my suspicion, that this was a complete staging to get eyeballs for his renomination campaign. Or both. Now, it is your choice, what you believe in!

Vital and happy regards
Klaus Forster

PS: If you need more confidence in my prognosis for the stock market, have a look at my stock market prognosis from March 2020, and compare how it turned out until today.

Last Hour Decision-Making Meditation 4: Your Investments in The Stock Market

 

1 thought on “Prognosis For The Stock Market”

  1. Pingback: Prognosis For The Stock Market – Vitality 4 Happiness

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top