For weeks, if not months, you have probably been hearing the term “black swan” in the markets. People will say “this could be the black swan..” or, “is this a black swan?” Well, in my opinion, the black swan is here!
A black swan in market talk is any unforeseen event that could shake things up negatively. Well, as you probably already know, Nancy Pelosi announced plans to move forward with an impeachment inquiry against President Donald Trump.
This is my black swan event. This, in my opinion, is the catalyst that could send the markets lower. As I stated in a previous post, the technicals are mounting in favor of the bears. Chart after chart, bearish signals are increasing: Double tops, RSI and Volume divergence, lower-low/lower-close, etc. etc… I could go on. But it has seemed like a strong catalyst would be needed to put those bearish signals in motion.
I do not believe a trade deal will get done in October… and that, mixed with impeachment inquiries, could very well cause the markets to tumble. How much will they tumble (if they tumble), is anyone’s guess. But, if you held my feet to the fire and asked me my opinion on the drop, I would say somewhere between 10 and 20%.
Who was the architect behind this economy? Some would argue Obama was, but I think the majority would say Trump was. The threat of removing the very architect of this tremendous bull market is frightening for market participants. Not to mention the overall political uncertainty that impeachment proceedings bring.
If nothing else, this will create a pretty bumpy ride. Maybe I’m wrong, and honestly I hope I am, but I do not think so. I think when you factor in the mounting bearish signals, the market bears are looking for any catalyst they can get their hands on to drop it. But that’s not a bad thing.
When people here recession they almost freeze in terror. But I don’t. I’m not even saying this will start a recession… but, corrections and even recessions are actually healthy from a market standpoint. They bring prices back down to manageable levels, and the smart investor is just waiting at the bottom to scoop up all the good deals. Which, is what I will be doing when the time comes – bet on that!