Showing posts with label economicdownturn. Show all posts
Showing posts with label economicdownturn. Show all posts

Monday, October 19, 2026

If A Stock Market Crash Is Coming, History Says This 1 Strategy Has a Perfect Track Record

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There’s one investing strategy that boasts a perfect track record. First, buy a low-cost S&P 500 (^GSPC-1.09%) index fund such as the Vanguard S&P 500 ETF (VOO-1.10%) or the State Street SPDR Portfolio S&P 500 ETF (SPYM-1.11%). Second, hold it for at least 20 years. Following this approach in the past has always made money. The S&P 500 and its predecessors have never produced a negative 20-year total return. Not even during the Great Depression, World War II, the 1970s stagflation, the dot-com bubble’s burst, or the 2008 financial crisis. Every 20-year holding period ended with a positive gain……….Continue reading…

By Keith Speights

Source:  The Motley Fool

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Critics:

The stock market is one of the most important ways for companies to raise money, along with debt markets which are generally more imposing but do not trade publicly. This allows businesses to be publicly traded, and raise additional financial capital for expansion by selling shares of ownership of the company in a public market.

The liquidity that an exchange affords the investors enables their holders to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as property and other immoveable assets. History has shown that the price of stocks and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood.

Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d’ĂȘtre of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security.

This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as possibly employment. In this way the financial system is assumed to contribute to increased prosperity, although some controversy exists as to whether the optimal financial system is bank-based or market-based.

Recent events such as the Global Financial Crisis have prompted a heightened degree of scrutiny of the impact of the structure of stock markets (called market microstructure), in particular to the stability of the financial system and the transmission of systemic risk. A transformation is the move to electronic trading to replace human trading of listed securities.

Changes in stock prices are mostly caused by external factors such as socioeconomic conditions, inflation, exchange rates. Intellectual capital does not affect a company stock’s current earnings. Intellectual capital contributes to a stock’s return growth. The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information at the current time.

The ‘hard’ efficient-market hypothesis does not explain the cause of events such as the crash in 1987, when the Dow Jones Industrial Average plummeted 22.6 percent—the largest-ever one-day fall in the United States. This event demonstrated that share prices can fall dramatically even though no generally agreed upon definite cause has been found: a thorough search failed to detect any ‘reasonable’ development that might have accounted for the crash.

It seems also to be true more generally that many price movements (beyond those which are predicted to occur ‘randomly’) are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this. A ‘soft’ EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants cannot systematically profit from any momentary ‘market anomaly‘.

For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and value at risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable). Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors ‘cancel out’).

Psychological research has demonstrated that people are predisposed to ‘seeing’ patterns, and often will perceive a pattern in what is, in fact, just noise, e.g. seeing familiar shapes in clouds or ink blots. In the present context, this means that a succession of good news items about a company may lead investors to overreact positively, driving the price up. A period of good returns also boosts the investors’ self-confidence, reducing their (psychological) risk threshold.

Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.

In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.

Stock markets play an essential role in growing industries that ultimately affect the economy through transferring available funds from units that have excess funds (savings) to those who are suffering from funds deficit (borrowings) (Padhi and Naik, 2012). In other words, capital markets facilitate funds movement between the above-mentioned units. This process leads to the enhancement of available financial resources which in turn affects the economic growth positively

Economic and financial theories argue that stock prices are affected by macroeconomic trends. Macroeconomic trends include such as changes in GDP, unemployment rates, national income, price indices, output, consumption, unemployment, inflation, saving, investment, energy, international trade, immigration, productivity, aging populations, innovations, international finance.

Increasing corporate profit, increasing profit margins, higher concentration of business, lower company income, less vigorous activity, less progress, lower investment rates, lower productivity growth, less employee share of corporate revenues, decreasing Worker to Beneficiary ratio (year 1960 5:1, year 2009 3:1, year 2030 2.2:1), increasing female to male ratio college graduates.

Therefore, the stock market may be swayed in either direction by press releases, rumors, euphoria and mass panic. Over the short-term, stocks and other securities can be battered or bought by any number of fast market-changing events, making the stock market behavior difficult to predict. Emotions can drive prices up and down, people are generally not as rational as they think, and the reasons for buying and selling are generally accepted.

Behaviorists argue that investors often behave irrationally when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money.However, the whole notion of EMH is that these non-rational reactions to information cancel out, leaving the prices of stocks rationally determined.

London close: Stocks mixed after ECB rate cut ShareCast 21:41

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StockMarketCrash ,Investing ,StockMarket ,FinancialLiteracy ,MarketTrends ,EconomicDownturn ,FinancialEducation ,TradingTips ,InvestmentStrategy ,StockTrading ,MarketAnalysis ,WorldEconomy ,InvestmentRisks ,WealthManagement ,FinancialCrisis ,StockExchange ,BearMarket ,EconomyUpdate ,MarketVolatility ,InvestorAwareness

Thursday, February 19, 2026

The Surprising Reason Credit Card Companies Love Economic Downturns

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If you open up your wallet, you will likely find you have cards with the logo of either Visa (V -1.00%) or Mastercard (MA -1.34%) emblazoned on them. Go into just about any store or restaurant, and you will likely find they accept those same cards because they are Visa or Mastercard cards.  However, these cards aren’t issued by Visa or Mastercard, and that makes a huge difference when it comes to the impact of an economic downturn……..Continue reading….

By Reuben Gregg Brewer 

Source:  The Motley Fool

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Critics: 

Credit card debt results when a client of a credit card company purchases an item or service through the card system. Debt grows through the accrual of interest and penalties when the consumer fails to repay the company for the money they have spent. If the debt is not paid on time, the company will charge a late-payment penalty and report the late payment to credit rating agencies. Late payment is sometimes referred to as “default”.

The late-payment penalty increases the customer’s total debt. A customer’s interest rate may be significantly increased as a result of them missing multiple payments. The penalty Annual percentage rate (APR) varies between card-issuing companies and is usually disclosed in literature at the time of a credit card application, and also on a paper notification that is sent with the credit card to the customer’s residence.

Research shows people with credit card debt are more likely than others to forgo medical care than others and that the likelihood of forgone medical care increases with the magnitude of credit card debt. Declines in credit card debt are often misinterpreted because they omit information about charge-offs. Declines in credit card debt may be caused by consumers paying off their debt, credit card companies writing off charged-off debt, or a combination of both.

 The inclusion of charged-off debt can significantly affect debt trends and the characterization of a nation’s financial health. Consumers commonly pay off a large portion of their credit card debt in the first fiscal quarter of the year because this tends to be when people receive holiday bonuses and tax refunds. Credit card debt tends to increase throughout the rest of the year. Credit card debt is said to be higher in industrialized countries.

The average U.S. college graduate begins his or her post-college days with more than $2,000 in credit card debt. The median credit card debt in the U.S. is $3,000 and number of cards held is two. According to the Federal Reserve Bank of New York, “the amount owed by all Americans on their credit cards increased to a record $1.13 trillion at the end of 2023”. Wilbert van der Klaauw, a Fed economic research adviser, said growth in credit card debt shows “increased financial stress in younger and lower income families”.

Bankrate advises people with credit card debt to look for options and use what they find to try to negotiate a reduced rate from their current credit card provider(s). On May 25, 2023, Bankrate reported some companies offer “a 0 percent intro APR for 21 months from account opening on purchases and qualifying balance transfers, (18.24%, 24.74%, or 29.99% variable APR thereafter)”. After the start of the Great Recession in December 2007, multiple-credit-card debt-relief options became widely popular for U.S. residents with unsecured debt of over $5,000.

Although each of these debt-relief options deals with credit card debt, they are also able to deal with other types of debt. including personal loans, medical debt, accounts in collections and more, epending on the program type. These programs have not been enough to help enough Americans get out of debt, resulting in economists calling for action and a massive debt bailout by government.

As of 2024, credit card issuers are required to disclose to the customer how much money a balance will take to pay off if only the minimum payment is made on their billing statement. Debtors who pay their debts on time and keep their credit utilization under 30% tend to have a higher credit score. “Maxing out” or using most of one’s available credit, along with late or missed payments, negatively affects credit scores.

 

Total credit utilization, payment history, and the length of credit history are among the factors that determine a consumer’s credit score. The overall score of a debtor depends on both the score model and the credit bureau used to calculate a particular score. In the U.S., a consumer has the right to dismiss certain types of debt under U.S. Chapter 7 and Chapter 13 bankruptcy laws but to do so, they must fulfill certain obligations.

A bankruptcy expert reviews the debt with the debtor prior to proceeding with these actions. Certain kinds of debt reviewed may be considered fraud if it is discovered a line of credit was used to make unusually large purchases or cash advances 60 days before the bankruptcy case was filed. Some credit card companies have attempted to lobby at the U.S. federal level to tighten U.S. bankruptcy laws to make the cancellation of credit card debts more difficult.

Once a debt is handed to a collection agency, the agency will attempt to recover the customer’s unsecured debt. If a debt-collection agency is unable to collect a debt despite attempting to do so, it may use legal action in court to attempt recovery of the debt. A successful judgement against the debtor can include seizure and garnishment of assets including bank accounts and wages in order to pay off outstanding debts

Customers have rights under the U.S. Fair Debt Collection Practice Act, which specifies they can ask in writing a debt-collection agency to stop calling them about a debt. This does not stop the collection process but may lead to a legal challenge if a no-contact request is made.

If the statute of limitations has passed in certain U.S. states and legal actions have not been issued against the debtor, a collection agency must remove the outstanding debt from their credit report. The process in the U.S. varies between states. A collection agency or credit card issuer may choose to forgive the entire debt, relieving the debtor of the need to repay the debt. In the U.S., this results in the sending of a 1099 C tax form to the debtor, which the debtor is required to file. In the U.S., the reportable amount varies between states.

What are the best ways to get rid of credit card debt in retirement? CBS News 20:49 Thu, 14 Nov 

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Labels: #EconomicDownturn #RecessionReality #FinancialHealth #MarketTrends #EconomicAnalysis #InvestmentStrategies #CrisisManagement #BusinessResilience #CreditCards #DebtManagement #CreditCardProblems #CostCutting #WealthBuilding #FinancialReform #SurvivalStrategies #SmallBusinessSupport #FinancialEducation #FutureOfEconomy #EconomicRecovery

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