Investing

Why The Stock Market JUST Dropped

why-the-stock-market-just-dropped



Here is what’s happening in the stock market today, how to invest moving forward, and everything else you need to know to build wealth and retire early. Enjoy! Add me on Instagram: GPStephan

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First, in terms of WHY the market is going down – here’s what’s coming into play, all at the same time: DEEP DOWN – what all investors DON’T like – in ANY MARKET – is uncertainty. Investors don’t know how policies might change over the next few years – they don’t know how tax rates might affect them – they don’t know how to base their future projections – and because of that, most investors and analysts get a little more cautious and play it a LITTLE SAFER in case things don’t turn out as they expect.

LPL research in September here:
https://lplresearch.com/2020/08/31/historic-august-opens-door-to-worst-month-of-the-year/
https://www.thebalance.com/presidential-elections-and-stock-market-returns-2388526

And also – this is probably the most relevant for a LOT of people watching – especially in terms of how NOT to lose money – and that all has to do with one word: DEBT.

Yahoo recently reported that 43% of retail traders are now trading with leverage…if we break that down further, 23% are trading JUST using options, and 10% are JUST using margin…signaling that MAYBE we’re in the middle of an “options boom.”
https://finance.yahoo.com/news/43-of-retail-investors-are-trading-with-leverage-survey-172744302.html

In the last YEAR, options trading has increased in popularity by 45%…and when we look back historically, we can see that options trading increased in volume over the last 12 months, and began their slow trickle upwards once Robinhood was introduced, and then once brokerages began offering free stock trading.
https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a526c

That could explain some of the volatility in today’s market – Goldman Sachs estimated that now, 20% of all SP500 options traded in the second quarter had a maturity of less than 24 hours, up from 5% in 2011-2016…that means, people are leveraging their money 100x with short term, speculative bets on where the stock market is going to be headed in a 24 hour period.
https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a526c

That leads to the notion that, POSSIBLY – tech options trading has influenced the entire market to rise up abnormally fast, and then plunge rather quickly as options traders bought up – and then SOLD their holdings.

Anyway, I also think this would be a CRITICAL warning to any new investors out there to preferably NOT use leverage when buying stocks…the fact that 43% of traders are using some margin or trading options is rather concerning, and I guarantee this can’t end well and it’s only a matter of time until the tables turn and people lose a LOT of money.

So, yeah – I mean, obviously, you know I’m just going to say the same “buy and hold!” that I’ve been repeating for YEARS nonstop, even while the stock market was dropping 40%….if you’ve watched more than a few of my videos by now, this isn’t any surprise. But, I do want to use this as a time to caution you that you SHOULD be prepared for more volatility over the coming few months, you should understand how options trading is going to magnify these swings both positive and negative, and you should MAKE SURE you don’t trade on margin or trade options UNLESS you really know what you’re doing, or you have money that you can afford to lose.

For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com

*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

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48 Comments

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  19. Neil Patel
    July 16, 2021 at 10:46 pm

    Nice video , Stock investment is profitable everyday and investors are making good profits but its never too late to invest in stock

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    I bought all the way down this past month and look at the payoff today!

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    Arbitrage is banking hard on all these spreads

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    You have done harm introducing the casin- err, options to your audience

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    I’m taking my money out after the election. Cuz we will see a crash /a big one.. TRUMP win stock goes up. But watch after..

  27. Solopreneur
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    Can you show your stock market portfolio?

  28. Camila Flores
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    Thoughts on FBGRX for my roth? Killer returns historically.

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