If Trump Loses 2020 Election, We May See A Market Crash!

Isn’t that the craziest headline? Why in the world would President Trump losing in 2020 crash the Market? 

In today’s post, we are going to dive into a few key items you need to watch and plan for when trading in the Market, or if you own stocks.

Headlines run rampant when the Market does a big jump or big drop.  Take this one from MarketClub:

I love MarketClub and I use their platform on a daily basis.  It helps me navigate trends in the Market and most importantly, it signals me when I should be cautious.

But, just like most, Headlines are what attract readers.  And that is what MarketClub is trying to do here. That was the point behind my headline.  But, just like MarketClub, I am going to give you some perspective and resources to help you, not just write an article that instills fear.

I have no idea, nor do I worry about whether the outcome of the 2020 Presidential election either crashes the Market or sends it higher.

The reason is because it doesn’t matter.  Think about it, if my headline comes true and you end up losing a significant amount of your wealth? Will it really matter why the market just crashed?

Will it help you re-coup your losses?  The answer is a resounding “No”!  Sure, you will be upset and will want to blame someone, so why not the election, or Facebook, or China, or my dog.

The point of all this is that you need to have a plan.  For example, this MarketClub headline is actually a video explaining that we just received a signal, warning us to take a sideline position. The headline makes no difference, it’s just there to grab our attention.

So how do I handle my stocks/ETFs when we see these headlines?  To be honest, I do nothing based on headlines and there are only a few publications where I will read the story, MarketClub being one on a very short list.

So, in this case, MarketClub is giving us a signal to be cautious and take a sideline position in the market. If we wanted to protect our position(s), we could buy a Protective Put at the current Market price.  We could choose an option that expires in 90 days or one that expires in 2021.  If the market does crash, Our Protective Put would sky rocket and any “paper loss” we would incur on our shares would be offset by the money we would potentially make on the Put.

That is just one example for those that own stocks or ETFs.  For those that are actively trading options, you would want to follow your plan when you receive this type of signal.  

For example, not only did the S&P 500 get this signal to take a sidelines position, but so did two stocks I have Bullish options positions open on.  When I get a signal, I don’t monitor the stocks and look at the charts.  My options expire in 44 days, and in many cases a medium term signal, like the one we just received on MarketClub can signal a longer term warning.  So, I exited my trades this morning. That was built into my plan.

Here are my trades:

SOLD -3 VERTICAL COST 100 17 JAN 20 295/290 PUT @1.88 ISE	$‎ (0.18)	$‎ (3.90)	$‎ 564.00
SOLD -3 VERTICAL COST 100 17 JAN 20 295/290 PUT @1.88 ISE	$‎ (0.18)	$‎ (3.90)	$‎ 564.00

BOT +3 VERTICAL COST 100 17 JAN 20 295/290 PUT @1.93 CBOE	$‎ (0.15)	$‎ (3.90)	$‎ (579.00)
BOT +3 VERTICAL COST 100 17 JAN 20 295/290 PUT @1.93 CBOE	$‎ (0.15)	$‎ (3.90)	$‎ (579.00)

That is a Net $30 loss on those trades.  Sure, it would have been nice to keep all that credit of $1,128, but I no longer focus solely on profit.  I focus on my risk first and if this stock continues its trend down as MarketClub has signaled, I would stand to lose more than $30. 

Let me be clear though, I am not telling you to go out and do any of these two things! I am merely trying to educate you on the resources available and the ways you have to protect yourself.

Now, let’s come back to the headlines.  The headlines signal a fear in the Market.  I don’t take much stock in headlines, but I do take stock in sentiment and like it or not, the market isn’t driven mainly by the fundamentals.  A company’s dividend may be, but the company’s stock price is based on emotions.

In my opinion, emotions drive more of the market than fundamentals do, especially in times of uncertainty. If we look at past market crashes, you see how emotions got the better of most.

There is a lot of conflicting guidance out there. I recently watched a YouTube video by this young investor who was trying to make the point for not timing the market and allowing dollar cost averaging to steer the ship.

And while he makes very good points, his view is myopic. For example, in a market crash, he was stating that the worst thing to do is get out after you’ve encountered huge losses, and he’s right.

But, what if you have no choice. What if you are 70 years old and have either a tax deferred 401k or IRA? Well, you are required to take minimum distributions. The IRS has a chart for this and if you do a variety of calculations with different size accounts you find that the distributions is roughly 3-4% per year.

I left you a link here: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

So, although you would like to weather the storm during a market crash, there are more and more baby boomers and retirees that can’t in many cases.

There are a host of discussions we could get into on this subject. The main goal is to know what you have to do and have a plan that can weather all storms.

But, the moral of this post is, if the headlines make you nervous, then you haven’t protected yourself.  The best way to defuse fear is through education. Educate yourself on how to protect your investments, focus on risk first and profits second.  And above all, have a plan.  

Your plans have to take into account for turbulent times as well as for a stock market that surges up for a decade. It’s best to base your plans on systems that are proven to work, not headlines that are there to just sell fear!

You can start your education here: http://www.learn-stock-options-trading.com

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Thanks for reading!