Here are my thoughts on what will happen to the stock market in 2021, what this means, and how to invest in the following year.
There are 3 main indicators that point towards a Stock Market Crash:
1. Lockdowns
Lockdowns are detrimental for regional economies, especially for SMEs. Although a stimulus package might soften the blow to small businesses and households, it does not address the structural damages of the real economy.
2. Vaccine
A vaccine ready for circulation is great news. However, people's confidence towards the efficacy and safety of the vaccine, along with logistics limitations may slow down the positive impact it would otherwise have.
3. Recessions are Inevitable
Even without the current health crisis, economic recessions take place approximately every 10 years, meaning, we're right on schedule for the next one.
As with previous market crashes, the 2021 stock market crash should not be a problem for well diversified investment portfolios. My strategy for the crash is to:
1. Re-evaluate current positions, and adjust accordingly.
2. Buy into companies I am confident in, especially if their price falls.
3. Utilize a small investment fund for opportunities that may arise during the crash.
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