Should We Prepare for a Market Crash?

Ben Garves Podcast: Fitness, Nutrition, and Activism

One of the cool things about branching out from the old WODDITY Podcast is that I get to help you with things that go above and beyond our old CrossFit focus. One of those topics is financial security. In March we watched one of the biggest market roller coasters in the history of our modern financial infrastructure, followed by an almost immediate surge to a 30 percent national unemployment rate. Swings like that affect real people and real jobs.
https://www.bengarves.com/should-we-prepare-for-a-market-crash/

But despite a third of Americans being out of work, the complete halt of tourism with the closure of hotels, resorts, and restaurants, and the near-total grounding of global air travel, the stock markets have recovered and a number of stocks are knocking on record high values.

So wait...is the economy bad? Or is the economy good?

Well, let's start by saying the stock market isn’t necessarily a direct indicator of how good the economy is. It represents the demand for ownership, or stock, of some of the largest companies in the world. Those companies can have business models or products which are quarantine-proof.

Take Amazon, Walmart, Target, UPS, and FexEd, for example. Quarantine has only increased demand for online shopping and product delivery services. On the other hand, a company like Disney lost over $5 billion in projected revenue because their income depends significantly on their network of theme parks and on box office turnout for their films. Both being activities people have taken a step back from.

Then you have a company like Tesla, which has seen its stock jump from $300 per share to over $1,400. All the while, nobody is buying cars. You could argue Tesla was undervalued at $300, or that it’s such a new and exciting business prospect that investors are spending money on it despite a lack of demand for their products.
Either way, we know that with 30 percent unemployment, we’re likely to see a 30 percent decrease in goods made and services rendered, and therefore a potential 30 percent drop in the total value of business conducted in the United States. Which companies are impacted, where, and how deeply, then becomes an educated guessing game. We know the healthcare industry is in high-demand right now. We know fast food and eat-in restaurants are struggling, while meal delivery services are booming.

But, what we cannot see directly represented in the stock market is the struggle of the estimated 30 million small businesses operating in the United States today. Those businesses don’t get the same visibility, but drive a significant chunk of our economy.

Any personal finance guru will tell you that you should be saving money for a rainy day. This is the time to start, if you haven’t started preparing.

Thanks for listening this morning. Please be sure like, rate, review, and subscribe. It’s free to you and means the world to me. I’m Ben Garves, and we’ll chat tomorrow.