Let’s face it- 2020 has been a rough year, especially for those looking to make money trading stocks. The stock market’s volatility this year has been stomach-churning- alternately crashing, and buoyantly bouncing back, despite a raging global pandemic and mandated economic shutdowns. As The Economist notes, “ These extremes [of economic crash and high unemployment, followed immediately by robust government response] make valuations hard for investors to assess. it is as if someone turned on a scalding hot shower and then reacted by emptying a bucket of ice over themselves.”
Throughout this uncertainty, Americans may be eyeing their balances and stressing over their retirement funds or about their future financial stability. However, the same volatility that can be emotionally stressful can actually be a source of opportunity for the knowledgeable and logical investor. Here’s how you can manage your investments wisely in times of turmoil and make money trading stocks in 2020.
1 – Take Advice from Seasoned Traders on How to Make Money Trading Stocks
If you’ve invested large sums and see your balances start to plummet, it can be easy to respond emotionally with a “sell” decision, based on short-term losses, in an attempt to curtail your losses before they mount. However, a seasoned trader may encourage you to look at these events within a longer-term trajectory. Is the investment potential permanently over? Is the company fundamentally vulnerable due to permanent changes in demand? Or is it more likely that this dip is a bumpy road along the stock’s long-term path to being a profitable investment?
2 – Pay Attention to To the Fed
The stock market does not always mirror the good and bad fortunes of our economy. “One reason for this mismatch between the markets and the economy,” notes The Economist, “is that official attitudes to financial downturns have changed a lot since Andrew Mellon, America’s treasury secretary under President Herbert Hoover, argued after the crash of 1929 that downturns would “purge the rottenness out of the system”. Now central banks and governments respond vigorously to economic and financial trouble, and taxpayers may bear more of the burden of the crisis than investors.”
So how is the Fed reacting to our current crisis? Jurrien Timmer, director of Global Macro for Fidelity Management and Research Company, writes for Fidelity that “…as shocking as COVID’s impact on the economy has been, so has the policy response. The Fed’s balance sheet is now approaching $7 trillion, up from $4.17 trillion in February. We seem to be on course for a repeat of the 1940s, during which the US government spent massively to enter World War II, and the Fed monetized the debt that this produced.” Timmer states, “I can easily imagine a $10 trillion balance sheet in the coming years.”
3 – Educate Yourself
There have actually been recession warning signals in the market, even before coronavirus hit. Short time bond yields have exceeded long-term bond yields at various points in time from March 2019 to January 2020- a phenomenon known as an inverted yield curve, and which can signal a recession. This hardly made headline news- it was more like the postscript in the occasional radio broadcast- but it is a noteworthy sign.
So, how can investors educate themselves effectively about the stock market to make money trading stocks in 2020? A great way to start is to subscribe to relevant investing news, through magazines, podcasts, or a stock market newsletter.
How to Make Money Trading Stocks in 2020 with the Mad Hedge Fund Trader
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