How to Profit From the Potential Stock Market Plunge on January 6th

How to Profit From the Potential Stock Market Plunge on January 6th

Posted On November 19, 2020 10:37 am

It’s been a wild 2020 to say the least. This year has literally been the best of times, and the worst of times.

(Source: Jill Mislinski)

The year began with a strong rally right up until February 19th’s record high. Then we had the fastest bear market in history, with the S&P 500 plunging 34% in four weeks. Next, we had the strongest bear market rally in history, with the market returning to new record highs five months later. In late October, ahead of the November elections, and with viral cases soaring to record highs, stocks fell 6% in a week, the sharpest weekly decline in March. That was followed by the strongest election rally in US history, helped along by news of two promising vaccines that are expected to arrive by the end of the year. In this year of so many unprecedented firsts, and wild volatility, there is one bit of news that has the potential to once more send Wall Street skidding hard and fast. And unlike most short-term risk factors, this one has a definitive date that investors can circle on their calendars, January 6th, 2021.

Why January 6th Might Be The Day Another Correction Begins

No one can predict exactly what catalysts will or won’t trigger a sudden shift in investor sentiment from bearish to bullish or vice versa. The world is incredibly complex and hundreds of millions of investors with different goals, dreams, fears, and risk profiles are who drive stock prices up and down on any given day. However, the consensus among most analyst firms, including blue-chip economists consensus names such as JPMorgan, Moody’s, Goldman Sachs, UBS, and Bank of America is that right now Wall Street is bullish due to three main reasons. In fact, JPMorgan recently went wrote a note to clients saying that we’re experiencing stock market nirvana due to

  • good vaccine news giving investors confidence that the pandemic will end next year
  • divided government due to the victory of Joe Biden but the Democrats failure to take the Senate
  • the expectation (due to Mitch McConnell saying several times) that more stimulus is coming in early 2021 (though smaller than initially expected)

What this all means for investors is that economists expect the strongest economic growth in 20 years in 2021, and no chance of major regulatory reforms or an increase in corporate tax rates.

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Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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