The day after Trump was elected I sold 90% of my stock holdings. The Dow Jones was hovering just under 20,000. Since then, the stock market has been on a mostly upward trend with DOW 27,000 in view. Had I stayed in, I would have earned more than what I made through other investment such as CD’s, money market funds, cash, and bonds. Still, I made some positive moves. I sold half of my American Airlines stock at $42 a share. The stock today is at $29. More importantly, I slept well, knowing that my retirement savings were safe.
I’ll be the first to admit that I’m no stock expert. Over the last two-and-a-half years, I have slowly gone in and out of the market, with lousy timing each time. Even the experts will tell you that you can’t time the market. But I’m about to do just that. I predict a decline in the market of 30% to 40%. I also predict that this decline will begin in October of this year.
I talked about some of my reasoning in the post The Coming Economic Storm. In that post, I gave a few reasons for my skepticism: The historic stock market run, the fact that there has been a recession in the first term of every Republican President going back to Theodore Rosevelt, and most significantly an ineffective government. The latter being the gravest concern. Now that Trump is behind in the polls and has a dismal approval rating, his worst instincts will be on full display. Trump will take any short term gain if he thinks it will help his reelection chances regardless of the long term consequences. Just look at our ballooning debt crisis.
Why October? Next month we will learn from third-quarter numbers that the economy is slowing and on a downward trend. Investigations into Trump’s many misdeeds will begin in earnest next month, and the details of obstruction, tax dodges, money laundering, campaign finance violations, and other criminal acts will be exposed. October has also been a bad month for stocks historically. Some of the worst downturns have begun in October – 1929, 1987, 1997, 2002, 2007. And then there is Trump himself. He wants so badly to get something positive under his belt that he will do or say just about anything to turn the tide, such as making a bad deal with Iran or China or stealing military money to build a few miles of a useless border wall.
So here is my prediction. By early October the stock market may rise to 29,000 or higher due to temporary moves by team Trump to manipulate the market, such as announcing a deal with China, that will later turn out to be untrue or overhyped. By late October the storm clouds will be gathering, and we will be well on our way to DOW 17,000 or lower.