On March 12, the longest bull run in U.S history came to a swift end with the Dow’s most dramatic single-day fall since the onset of the 1987 stock market crash. The fall, triggered by global fears surrounding the escalating COVID-19 pandemic and the prospect of a global recession, ushered in a new bear market.
Shortly after the March 12 dive, the Trump administration declared a national emergency. A few days later, it was announced that a federal aid package is being considered, intended to help individuals and businesses stay afloat during the next few months. As a result of both of these developments, fears about the market’s prospects were somewhat alleviated. And so on March 17, the market once again began to climb, inspiring hope and optimism in the hearts of investors around the world.
But in the time of COVID-19, optimism is a dangerous worldview to adopt. Realism is a far safer option; and as investors, the best strategy that we can adopt right now is to be as realistic as possible about the months ahead. So in the spirit of being realistic, let’s make one thing perfectly clear: according to the world’s top medical experts, it is highly probable this pandemic will continue to escalate at least through the Spring of 2020. Global markets, as a consequence, are going to undergo a massive stress test. And many top financial experts have begun to voice concerns that the coronavirus economic impact will almost certainly lead to a global recession.
And yet despite the feeling of apocalyptic doom which seems to hover over all of us right now, there’s one crucially important thing that we should be reminding ourselves of every day: it will pass. There’s no doubt that we’re all in for some extraordinary and challenging times in the months ahead. Individuals, businesses, governments, and entire economies will be strained in ways that are impossible to predict. And yet, as surely as the sun rises, economic balance will be restored and our current bear market will once again be handed over to the bulls.
Here are some key takeaways to keep in mind:
- The COVID-19 pandemic - and its attendant economic fallout - is going to get worse before it gets better. That said, always remember that it will get better.
- When it comes to investing, it never pays to panic. If we’ve learned anything from the past couple of weeks, it’s that our current economic climate can change dramatically in the blink of an eye.
- In every crisis there lies opportunity. At their current prices, buying certain high-quality stocks now could yield considerable returns once the market recovers.
This is not the first time that our economy has had to weather bear market territory, and it certainly won’t be the last. A crucial difference between our present moment and past crises is that we’re now equipped with the revolutionary power of AI and machine learning. These tools have the potential to guide investors through the narrow financial straits that lie ahead as the COVID-19 pandemic continues to unfold.
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