Navigating Your Finances During Uncertain Times
Needless to say, this is a very uncertain time for both the global and domestic economies. In a 24-hour news cycle environment where new information is being presented almost every 15 minutes, the markets have quite understandably been very volatile. But this isn’t a time for irrational decisions, or to react emotionally. This is a time to fall back on cold hard facts and fundamentals. Because with every market downturn lies an incredible opportunity. Let’s see if we can glean some sage advice from some of the market veterans who have seen this all before.
While the quote, “the time to buy is when there’s blood in the streets” is often attributed to Warren Buffet, the origin of the quote was actually from Baron Rothschild in the 18th-century. What The Oracle of Omaha did say however is, “to be greedy when others are fearful”. Nonetheless, the adage has held strong for a long time and holds quite a bit of wisdom to it. This is a stressful time, and it is natural to be worried about the future, but we are talking strictly about the markets here, and how to capitalize on a recent downturn. Humans are emotional creatures and react instinctively to stressful situations such as a market downturn. Sometimes harnessing the more reptilian section of our brains can benefit us greatly, and lead to sizable profits while everyone else is looking for the emergency exits.
What the experts are saying
Goldman Sachs analyst Peter Oppenheimer (pictured left) has determined that this recent downturn is “event-driven”. Meaning that it is fueled more by the recent outbreak event than any change in the market and economic fundamentals. With that in mind, it should bounce back more quickly than other bear markets like the Great Recession. He said, “At this stage, we think the balance is still in favor of this being an event-driven bear market, suggesting that the rebound in equity markets will be swift. On average, these kinds of bear markets triggered by exogenous shocks have seen declines of 29% and lasted nine months, with markets regaining their previous levels within 15 months.” Now, 15 months might seem like a long time, and it might be for those who are hoping to retire within the next year. But for everyone else, the most successful investors are the ones who play the long game.
Buy the dip
The purpose of this article is not to give individual stock advice or tell you what and when to buy. As always, consult with your financial advisor to determine the best path for you and your unique financial goals. But keep in mind that the job market is still as strong as ever, and just a few short weeks ago, most financial analysts were forecasting another year of strong growth. So while the pandemic will undoubtedly do quite a bit of damage to trade, tourism, and development around the world, there is light at the end of the tunnel. We just have to keep a clear head through the fog.