The Great Panic of 2020 is already etched into the annals of history. However, the repercussions have only just begun to unfold. The stock market crash, widespread economic turmoil, and erosion of personal liberties are likely to linger long after the threat of the coronavirus has subsided.
When it comes to the stock market, the game plan of the past decade has turned upside down. Instead of the familiar mantra of “buy the dip,” investors are now embracing a new strategy: “sell the rip.” Here’s the reasoning behind this shift.
If we look back to the fall of 1929, we find that the U.S. stock market entered a steep decline, coinciding with the onset of a decade-long Great Depression. Given the swift and severe declines we’ve witnessed in recent weeks, along with the likelihood of an extended economic downturn, it’s crucial to examine this pattern more closely.
Between September 3 and November 13, 1929, the Dow Jones Industrial Average (DJIA) plummeted by 48.9 percent. Interestingly, it staged a rebound of 48.1 percent by April 17, 1930. This rally had the unfortunate effect of enticing the “buy the dip” investors back into the market, just ahead of another significant downturn.
The bear market from 1929 to 1932, as described by Pater Tenebrarum, resembled a rubber ball careening down a staircase. With each bounce, even the most experienced investors were given yet another opportunity to incur losses. Continue reading
