Well, it’s official. President Trump has just declared a national emergency and we are in a bear market. Markets have declined anywhere from 25-35% in a mere 3-4 weeks … an unprecedented bloodbath. This action is abnormal and not easily fixed.
Until we discover the extent of how many people will get sick from the novel coronavirus (COVID-19), we are about to become a “Stay-At-Home” economy. Working from home, schooling from home and not allowed to go anywhere will become the status quo. A new term has been coined, as well: “social distancing.”
Until we are confident that the virus has peaked and in decline, it’s going to be horrible for the economy. While the potential for recession always wreaks havoc on the financial markets, this pandemic-induced threat not only dampens demand (normal recessionary pressures), but the disruption to the supply chain is a shock that the markets need to wrap their collective heads around. The lack of economic activity has already been discounted, to some degree, in the prices of global bourses and their respective credit markets; but the magnitude of this pandemic’s ripple effects are unknown at this point. Behavior will trump reality and hysteria created by the media will only fuel this. This behavior will be the blueprint for the pandemic economy … and the subsequent “new economy” post-crisis.
Even with the cavalry of the Fed’s monetary bazooka guns (massive liquidity) and governments around the world introducing unprecedented fiscal policies, the risk of further declines in the stock market is high and a recession looks inevitable.
Entire segments of the economy are either shutting down or moving online.
On the bright side, a number of our tactical strategies are defensive. Global View Capital believes that there are two sides of the investment equation: 1) Protect from severe market declines; and 2) Buy back in when the waters are calm again.
Ask yourself this question over the coming days:
“What will I lose more sleep over? A smaller than expected gain or a greater than expected loss?”
“Buy and hope” is not an investment strategy that works in a bear market unless you have a high pain tolerance.
We will get through this pandemic and when we do, we can all return to life, liberty and the pursuit of happiness.
In time, there will be huge buying opportunities and we will be ready.