There will be no bear market
This is a bold argument I’m going to make, but I’m starting to believe that there will never be a long term bear market like we saw in 2008 or in previous markets. Before start commenting please read through my thesis before arguing anything.
First, the velocity of money is near an all time low. Velocity is a measure of how many times a dollar changes hands per quarter. Traditionally it’s been well above 1 and sometimes over 2, but nowadays it’s only around 1. This means more people are hoarding cash than ever before because they’re not sure what to invest in. I think because of people’s fears over covid and recessions, they excessively hoard cash which makes the velocity of money so low.
Why does this matter? Let’s review the quantity theory of money or MV = PQ. For people who can’t do math, money printer go brrr but inflation is not super high because people don’t spend the money. The fed feels comfortable printing money because the velocity of money is so low. If people excessively save and never spend, there won’t be hyperinflation. Therefore I don’t think the fed is ever going to raise interest rates that significantly.
Someone else pointed out earlier that a record amount of money was put into the market at the last omicron dip— $6.7 billion. I think this is proof to me that the low velocity of money means people are saving and waiting for this kind of opportunity to invest. With the amount of cash lying around in the economy not being spent, people are just going to keep buying the dip at every opportunity forever. The market can’t tank because people are saving so much money that they’ll keep buying the dip.
Tl;dr people are saving too much money, so the fed can brrr forever and others will always buy the dip, making the bull run last forever $S&P 500 Index(.SPX.US$ $Tesla(TSLA.US$ $Nu Holdings(NU.US$
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Investing 101 : This is because you look at the retail investor point of view where we work, save and buy the dips. In fact markets especially large cap stocks are controlled by smart money. We do not have the billions to move the market. The 6.7bil that entered recently was due to smart money / market makers buying it up as the put options were over the roof. Everyone was anticipating a correction or crash due to inflation. So they bought puts to earn the move down or even hedge portfolios, the smart money were selling those puts. Once they were done selling, they bought the market back up and let your puts all expire worthless.
When people start understanding who moves the market, smart money not retail investors. The easier to navigate how this whole thing works.
Rann NewOP Investing 101: Thank you for your opinion! You think from the perspective of retail investors