Don’t Worry About Missing The Boat (Here’s Why)
As COVID-19 has unfortunately affected our friends, family, and neighbors, it’s also taken a toll on the stock market. In a month, the S&P 500 went from record highs to a bear market. That’s the fastest this has ever happened.
It took just 28 trading days for the S&P 500 to shed 30%. For comparison, it took 250 trading days for the S&P to decline 30% in the 2008/2009 financial crisis.
But as I’ve mentioned to my Top Stock Advisor readers, this isn’t the first time we’ve faced a pandemic. And as dreary as the headlines are out there, I want to bring some light to the situation… we will get through this and the market will rebound.
In fact, if history is any guide then things could turn around rather quickly…
As you can see, we’ve been hit with — and persevered — through numerous epidemics over the last few decades. Yes, I know none of these caused our entire country to grind to a halt, or (likely) cause a recession like COVID-19 has. And I’m certain that we will be reeling from this for the remainder of the year.
But I’m also excited about the opportunities that are out there today.
Right now, I’m reminded of something Warren Buffett said in his 2016 shareholder letter: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”
Buffett’s Berkshire Hathaway has $128 billion in cash stashed away. We know they’ve quickly deployed that capital when opportunities have presented themselves in the past. And I’m sure the folks at Berkshire are quietly scooping up as many opportunities as they can right now.
Where We Stand Right Now
Before this Black Swan event, our economy was chugging along quite nicely. I believe this will help us recover quickly. Also, as I mentioned in this article that folks are the least leveraged they’ve been since the Federal Reserve started keeping track in 1980.
The Federal Reserve and Congress have also quickly stepped in the help slow the bleeding. The Fed slashed short-term interest rates to zero, and a fiscal stimulus package was just approved by Congress and signed by the President. The price tag, by the way, is $2 trillion, which should provide a hefty shot in the arm…
The market recovered substantially on the news. In fact, we had three positive days in a row for the first time since early February. But don’t think we’re out of the woods just yet…
We still have some unavoidable pain that we must go through as we work our way past this pandemic. In the near term, we will have businesses that will go belly up, job losses, supply-chain disruptions, and challenges to the health system. This leads me to believe that we may have more downside ahead as this economic data comes to light.
As quickly as we’ve shut our economy down, it will be like starting a 1973 Ford truck when we turn it back on… it might turn over a few times before it fires up.
So do your best to remain calm, safe, and healthy during these unusual times. Don’t let emotions influence your investing decisions. We’ve seen the market fall double-digits one day and rise double-digits the next. These violent swings can cause a lot of anxiety. Don’t get caught up in it.
Action To Take
Understand what you’re buying, the risk you’re taking, have a plan, and execute it. From time to time, the market gives us an opportunity to grow our wealth permanently by offering wonderful companies at fair prices. We don’t want to miss those opportunities.
If a stock jumps one day, don’t think you’ve missed the boat. Have a longer-term mindset. If you miss the first 5, 10 or 15 percent, that’s okay — so long as the stock is still trading at a fair price.
To prove my point, just look at CME Group (Nasdaq: CME). If you recall, I mentioned this company a few days ago as one of the stocks I think investors should put on their watchlist right now.
Remember, this has been a Top Stock Advisor holding since 2014. And despite this major selloff, we’re still crushing the broader market. Now, do you think investors who bought back then are bummed if they missed out on the initial recommendation?
Highly unlikely. Even if they bought shares a year later — and missed the first 37% gain — they would still be up more than 90% today on that wonderful business. For comparison, the same investment in the S&P 500 would have provided a meager 18% return over the same time frame.
Remain patient and remain calm… there’s always another opportunity out there.
P.S. Here’s another opportunity you should look into while you’re making that shopping list…
For the past few days, I’ve been telling my readers about a little-known satellite company that just made a game-changing acquisition. And buried in the details of the deal was a stunning revelation that could be worth billions…