As the trade wars kick off and as the tariffs are enforced, U.S. companies, particularly those who have relied upon imported materials, may begin to see a decrease in their earnings, and as earnings decline, so too may stock prices. In addition to decreased earnings, Ted Bauman, an editor at Banyan Hill Publishing, believes that many current stocks are already overvalued, and feels that those stocks particularly will be vulnerable. The coupling of these factors could likely lead to the end of the latest Bull market, and cause an economic downturn.
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— Ted Bauman Guru (@TedBaumanGuru) August 14, 2018
Fortunately, Ted Bauman believes that securing and increasing wealth during a Bear market is possible and that with care and planning a well-managed portfolio can weather any day-to-day stock market fluctuations.
Picking good investments is a key component to weathering a market change, Ted Bauman recommends using a CAPE ratio, rather than earnings per share. The CAPE ratio uses real earnings per share, over a 10 year period, showing the true and long-term value of a company. The CAPE ratio levels the usual business and market fluctuations and will provide a clearer picture of a company’s worth.
Ted Bauman also encourages a balanced viewpoint to further ensure that investors choose stocks that have true potential to maintain value. Looking at corporate importing practices, labor relations, and corporate reinvestments will demonstrate which companies will be around for long-term investments, and which, because of production volatility, will be at risk.
Finally, when the market does turn, Ted Bauman reminds everyone to stay calm and believe in their investment strategy, as often times, market crashes are often followed by market increases, and that any disruption to a properly valued stock will adjust itself, and its value quickly. A Bear market may happen, but, well-valued companies will have the resilience to weather a crash.