If we were to personify yesterday’s stock market performance, I would have to call it Peyton Manning. The former Colts and (some-time) Broncos legend was arguably among the greatest quarterbacks in NFL history, but had an unfortunate reputation of choking in the playoffs when it really mattered.
Much like Manning, the market talked big in pre-market (pre-season), delivered in the opening few hours (regular season games), and when it came to the important stuff, actually closing out the day (playoffs), it choked. Bringing its Monday rally into Tuesday was a big ask, but the market started the day with the Dow (NYSEARCA: DIA) up 900 points, or 4%, with the S&P 500 (NYSEARCA: VOO) and Nasdaq (NYSEARCA: QQQ) following close behind.
That confidence faded though, and in the biggest stock market price swing since 1929, the major indices limped across the line just about in the red, with the Dow down 0.1%. This isn’t football though, and we can’t just draft the hottest college prospect as a fix; we need to get used to this new, volatile normal.
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COVID-19 dictates the market
A little over a month ago I naively wrote about how the coronavirus had become a market obsession and that we needed to move away from this mentality. Since then, my office has been closed, millions have filed for unemployment, I have been in isolation for 27 days, and tens of thousands have died.
Industry stalwarts such as Nike (NYSE: NKE), Starbucks (NASDAQ: SBUX), and Apple (NASDAQ: AAPL) have been forced to close their doors worldwide, directly affecting share price and guidance. Teleconferencing app Zoom (NASDAQ: ZM) has gone from 10 million to 200 million daily active users, springing up as a Wall Street darling, and then falling again due to privacy concerns.
In the past 3 weeks, other than the occasional WeWork-esque corporate scandal or an unusual Warren Buffett airline stock dump, every bit of company news has been dictated by COVID-19.
Before Tuesday’s rally faltered, the S&P 500 was on pace for its 13th straight day of moving up or down 1% or more, which is a longer streak than anything seen during the Financial Crisis and just two shy of the 15 straight days that occurred in Oct. 2002 at the lows of that bear market. In the last five weeks (25 trading days) the S&P 500 has seen a 1% move 24 times. The only other time that has occurred was during the Great Depression when there were two separate occurrences.
I was wrong to suggest ignoring the coronavirus’s impact on the stock market and focus on the individual stocks instead, as company actions are now directly related to the pandemic, and thus affecting future indices in a big way.
And it’s time to get used to it.
Volatility is the new normal
Just yesterday, ex-Cisco (NASDAQ: CSCO) CEO John Chamber echoed the pessimistic sentiment of many analysts when stating that the economic effects of the pandemic will be long-lasting; ‘nine months of pain’ in his words. As investors continue to chase the elusive market bottom in the hopes of getting the ‘next big thing’ in Tesla (NASDAQ: TSLA) or Virgin Galactic (NYSE: SPCE), many economists are attempting to prepare for a recession.
The truth is that we have no idea how long this pandemic could go on for and estimates of life getting back to normal range anywhere from this Easter weekend to 2021. Really, can any of us truly feel safe until a vaccine or treatment has been proven successful? That’s not for me to say.
Small and medium businesses are at real risk, as well as some big ones too, with the likes of Boeing (NYSE: BA) and the airline industry in general hemorrhaging cash. Millions of people are now unemployed, which takes money out of the economy, and the longer this goes on, the worse the economic impact. A recession seems unavoidable at this point.
But there are ways for investors to weather the storm…
How to beat the recession
There are a couple of ways investors can beat, and even benefit from COVID-19 volatility; the first being dollar cost averaging.
It is a great way for investors to take back a bit of control over the current market madness that has gripped Wall Street. All investors need to do is plan interval additions to their portfolio, choose the stocks they wish to invest in, and then most importantly:
Another method is by following the MyWallSt ethos of becoming a long-term investor, with a diversified portfolio made up of companies from our award-winning list of stocks.
Historically, the market has returned 10% annually since it first began, and with that in mind, this pandemic will pass, as will the recession that follows. We may be in hard times, and though it is hard to see, there is always a light at the end of the tunnel.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Content Manager at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.