How Low will the Stock Markets Go?

(Written on 21 March 2020)

Straits Times Index:

Current 20 March 2020: 2,410

2007 high: 3,805
1998 low: 1,084
2003 low: 1,203

Imagine if STI drops by 40% from its high of 3,805, it will be 2,283. If it drops to in between 1998 low of 1,084 and 2003 low of 1,203, it will be 1,143. This level is 70% below 2007 high of 3,805. As this is highly unlikely, a more reasonable drop will be 50% from 3,805 high. This is because the STI component stocks today are of much higher quality than the low of 1998 of 1,084 so unlikely there is an all-out market crash.

Also understand that today's stock market crash is not caused by financial, economic or war crisis but a pandemic health crisis. Also, this pandemic health crisis is very weather-driven, once the weather turns hot, it will not be pandemic. Also, vaccines are being developed, and one could be available as early as May 2020. Note that the financial markets today, including the banks and companies, are much stronger than in 1998. So it is highly unlikely that we can go back to 1998 low, which was caused by the Asian Financial Crisis.

Prediction: STI will likely drop to 1,902

The current level of 2,410 is already a 36% drop from its high of 3,805.

At the current level of 2,410, there is another risk of 500 points or 20%.
That means all stocks may have a 20% drop risk.

What do you think? Share me your thoughts

Comments

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