Dear readers, regular readers would know that I have been bearish on the global stocks markets including Singapore’s since last year. And I think my bearish views are really appropriate based on the recent developments in the economical and geo-political front. For Singapore, a recession this year has been confirmed. And it is not just a recession, economists interviewed have commented that the upcoming recession could be the worst Singapore will have in recent history, even worse than the 1985 recession.
In the 1985 recession, Singapore’s stocks markets benchmark, the Straits Times Industrial Index (the former equivalent of the Straits Times Index) went to a close of 620.04 (based on Straits Times Index Wikipedia ). The Straits Times Index (STI) closed yesterday at 2,591.60. So if the recession in 2020 were to occur and if it is worse than the 1985 recession, will the Straits Times Index drop to lower than the 620.04 level reached in 1985? That is, will the STI crash by more than 76% next?
I would also like to share with readers an extract of a 3 August 1985 news article from The Straits Times which mentioned the Straits Times Industrial Index then at 771.21 . Though the level in the aforementioned article might not be the lowest reached by the Straits Times Industrial Index then, my purpose is to show readers the order of the magnitude of the equivalent of the Straits Times Index then.
And indeed, the Straits Times Index has also tripled value in the last 30 years. This shows how investors could gain from an index-based investing strategy in the longer-term horizon. But as of today, I think it will be wiser for investors interested in an index-based strategy (e.g. index ETFs) to invest at one of the bottoms of the indices when stocks markets correct.
I believe the stocks markets will correct in the near-term horizon. For the Straits Times Index, will the 620.04 mark (in 1985) be revisited again? And if stocks markets were to correct to 620 mark (or below) again in the upcoming recession (if it were to happen) and then subsequently restage a recovery back to an average of 2,500 level, investors will be able to profit from a 300% gain from the Straits Times Index! Will that happens? I cannot say for sure but be prepared that the Singapore stocks could head south by several orders of magnitude down if the 2020 recession if it happens is indeed the worst in Singapore’s recent history.
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