Market Alert: An All-Out Price War — Plus, Why Markets Rebound AHEAD of the “All Clear” Signal
“You like pumping crude? Ok, let’s see how you like it when the world is flooded with oil!”
I can only imagine how the conversation between Saudi Arabia and Russian negotiators must have gone on Friday.
The two countries failed to reach an agreement on limiting Russian oil production. And following the failed negotiation, Saudi Arabia went ballistic.
The country is now promising to increase production — probably by millions of barrels per day — just to spite Russia.
As you’ve probably seen on the news, the result has been absolute panic in the oil market, and the broad stock market has also traded sharply lower.
So what can we expect this week? And how should you be positioned in this market?
Let’s take a look at where things stand and how you can protect and grow your wealth.
Maximum Uncertainty Leads to Maximum Opportunity
Over the weekend, several of my friends and family members reached out to me. They wanted to know when the market would hit bottom, and when they should start buying.
Of course, I couldn’t give them personal financial advice. And the truth is, no one knows where the exact bottom will be.
After all, the market’s swings up and down are simply the result of human (and some computer program) decisions on when to buy and sell. And as we know, humans (and machines) can be fickle and completely unreasonable during extremely uncertain times like this.
Coronavirus… oil production… global growth…
There are so many questions, causing people to hit the “sell” button now. And this is all happening before we figure out what the true damage from any of these issues will be.
This is why professional investors say that the market is a forward looking indicator.
Since traders act on what they expect to happen, the stock market typically moves ahead of what actually happens in the world and in the economy. And right now, we’re seeing the market move sharply lower before the coronavirus spread peaks, and before we know what the total damage will be.
Believe it or not, that’s comforting!
Because while markets typically sell off ahead of the worst of any crisis, they also rebound ahead of any resolution.
So as we kick off the week with a deeply concerned market reaction, I can tell you with certainty that the market will rebound ahead of the ultimate resolution for these issues.
And that gives us a lot of opportunity right now!
A Smart Approach to a Market in Turmoil
Here at The Daily Edge our priority is protecting your wealth first… And looking for opportunities to grow that wealth second.
So with that in mind, there are two things that I want you to consider this week.
First, we’ve been talking about increasing your investment in gold during this turbulent period.
Gold typically trades higher during times of uncertainty because investors are looking for a safe place to park their wealth.
This time around has been no different!
Gold prices have moved from below $1,500 at the end of last year to nearly $1,700 as I write. And many precious metals experts expect gold to move well above $2,000 per ounce as more investors buy into this market.
One quick and easy way to profit from this trend is to buy shares of the SPDR Gold Trust (GLD). This won’t put physical gold in your safety deposit box. But it WILL give you profits in your account if the price of gold continues to rally.
Second, I’d continue to use our “dollar cost averaging” strategy.
As a reminder, this is simply a way of slowly putting money to work in the market at these lower prices.
If you have $10,000 that you can invest in the market right now, I’d suggest breaking that cash down into several payments — maybe allocate $2,000 a week for the next five weeks.
You can then take your amount for each week and buy shares of stable dividend-paying stocks.
The beauty of this approach is that if markets continue to fluctuate — or even drop — you’ll be able to buy more shares with your weekly allowance. That means bigger dividend payments over time because the lower prices will allow you to buy more shares.
At the same time, if this does happen to be the bottom, you’ll at least put some of your cash to work right away. And you’ll be able to buy more shares on the way up.
Dollar cost averaging is a smart way to put money to work during an uncertain time period. And it keeps you from making an emotional decision out of fear or greed. Because those rash decisions rarely work in your favor.
Please remember, these market swings will eventually settle down.
Markets go through periods of chaos, and periods of calm. This is no different than the dozens of other periods of uncertainty that investors have lived through and profited from.
We’ll continue to keep you up to date on this situation and the best ways to profit from the market’s swings.
Hang in there and I’ll be back to you later this week!
Here’s to growing and protecting your wealth!