My Predictions for Stocks

September 2, 2015 by

Good morning from Lima, Peru.

I'm going to write today about my predictions for stocks and where I think the market's heading.

Now, a quick disclaimer... I'm no financial expert.  So take what follows as you will, but I won't be held responsible for any of your actions.

Recently we've seen a correction (a market drop of at least 10%).  And here's the thing...

I predicted a correction to happen soon, on 2nd August 2015.

Now it would have been great to be down on record saying that (especially when many of the talking heads on Seeking Alpha were saying how the market is doing great and can only go up...), but alas, I was not.

So rather than keep my opinions on stocks to myself, I'm going to dive in and give you my thoughts...

Prediction 1: The Stock Market is Only Heading Lower

I don't think this correction is a standalone event.  I think its the start of something bigger.

Just look at the macroeconomic picture:

  • China (you know, the worlds second largest economy) is struggling with its stock market and experts worldwide don't believe any data their industry puts out...
  • The US economic data is weak at best.  Labor participation rate sits at 62%.  Many of the jobs created since the crash have been part time or service jobs like waitresses and waiters, while many of the jobs lost have been high-paying energy jobs.  Business growth is slowing.  Consumers are saving more. Blah blah blah.
  • Interest rate hikes scare investors.  Despite a rate hike being small (likely around a quarter of a percent), its still an unwelcome sight in the eyes of most investors.  Why?  Because debt helps keep up the smoke and mirrors of growth.  Companies can cheaply buy their own stock back, pay dividends, etc.
  • Many "signals" are showing that its time for a new bear.  The "7 year recession cycle"... whether you believe in it or not, its pretty accurate.  1987, Black Monday.  1994, bond market crash.  2001, stock crash.  2008, subprime crash.  2015?  Along with this, the Dow has just moved its 12-month trailing average negative.  This typically precedes even more trouble for US stocks.
  • And the final point I'll make on this... We could already be in a bear.  As a savvy writer pointed out over at Seeking Alpha, bear markets rarely come at once.  They have two stages... and right now we could be in the first.

How to deal with this?

Get some "dry powder".  Many companies are about to go on sale at a discount.  Look for the companies with solid fundamentals and good management. For me, I'll be looking at Disney (among others) if the market drops -- a VERY well run company.

And look at gold...

Prediction 2: The Price of Gold Will Rise (Hello Junior Miners)

Gold has typically been seen at the "safe haven" when things get turbulent at home.  Investors know that its a hedge against inflation -- and not an investment play.

I expect more investors to move into gold.  And for the price to rise in the short term.

(Even if the mainstream media continues to attack it... I'm looking at you, WSJ and your "pet rock.")

How to play this?

I am going to be buying up a few solid junior mining stocks.  Right now, they're already very profitable (many could be if gold hit $800 an ounce), and a higher gold price is only going to increase sentiment and margins.

Prediction 3: Oil prices will rise again

Right now, nobody is making money with oil so low (well, a few are)...

Not the Saudi's, US drillers, Russia or anyone else...

Add to this cracks in OPEC, US revising estimates down, along with a few other factors, oil can only rise.

How to play this?

I'm going to be looking at a few of the larger oil companies.  It's still not a sector I'm totally confident of going "all-in" on, but I'm happy with my money being invested in companies that have shown they can survive low prices (think Exxon).

Prediction 4: Greece will need yet another bailout

This is more of a long-term prediction.  But one I wanted to mention nonetheless.

Put bluntly, Greece is screwed.

They're burning through money.  And all the latest bailout package has done is kicked the can down the line a year or two.

How to play this?

I'm not.  Not going near them with a stick.  Keeping my money in mainly US equities.

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There you go, folks.  These are my predictions.

And remember, I'm absolutely not a financial adviser, nor am I recommending you do anything.

Speak soon,

Chris Wright

Wealth Copywriter

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