Market Health

COVID-19 Is NOT the End of the World

You may have heard the saying “If it bleeds, it leads.”

And right now, there’s no shortage of bad news for anxious Americans nervously glued to the news.

Take your pick:

New cases of infections… body counts… crashing stocks…

Skyrocketing unemployment… impending economic disaster… runaway central bank stimulus…

This constant, unyielding pressure of negativity is weighing heavy in people’s guts like 2-month-old fruitcake.

It feels like there’s no escape. Though Americans aren’t going to stop trying to find one… or at least trying to drown those sorrows.

Alcohol sales in the U.S. rose 55% during the week ending March 21.

Digging deeper into the data, we find wine sales were up 42%.

Beer sales surged 66%. And spirit sales spiked 75% as Americans found inner peace through cocktails.

But this isn’t the time to gain a new addiction. It’s the time to think clearly.

My No. 1 Rule for Investors

I have one rule that I adhere to above all else: “Don’t panic.”

And not just every investor but every American should be pausing and taking deep breaths right now.

Relax… This too shall pass.

Now, there has been no roller coaster like the one we’re witnessing.

The markets tanked 34% over the course of 23 days.

The 11-year-old bull was slaughtered. The apocalypse seemed nigh.

Stocks then rallied 27%…
Broader Markets - YTD
Last week, even though we had a holiday-shortened schedule, the S&P 500 skyrocketed 12.1%.

That was the index’s best one-week performance since 1974.

The Nasdaq jumped 10% for its best week in more than a decade.

And the Dow Jones Industrial Average has been on a nearly straight shot higher since its March 23 lows.

In the blink of an eye, the bear market that suddenly mauled investors appears to have raced back into the shadow of the trees.

A lot of people are asking, “Was that it?

The Light at the End of the Tunnel

I don’t know if the worst is behind us.

But I do know that markets tend to overreact to the upside and downside. And as I’ve outlined here, event-driven bear markets are the shortest-lived type of bear market.

As for the number of COVID-19 cases, I also pointed out almost a month ago that “the best-case scenario is cases peak around April 14. The worst-case scenario is it’s two months after that.”

And we are seeing the number of cases start to flatten out now…
Confirmed COVID-19 Cases
That’s the light at the end of the tunnel you’re seeing there.

In China, Wuhan’s lockdown has come to an end. Wuhan was the first city to report COVID-19 cases.

So maybe we’re being granted the best-case scenario.

In either case, the most important thing for investors to do right now is to not get caught up in panic-selling or fear-of-missing-out buying.

There’s a lot of economic volatility we’re going to have to contend with in the months ahead. But the world is not ending. Over the past two decades, we have suffered the dot-com collapse, the Great Recession and now the global COVID-19 pandemic.

To many, I know it feels like we’re dancing near the mouth of madness. That the whole world is being devoured by a nightmare.

Even the conversations I have with friends (over videoconferences to maintain social distancing) have turned to subjects such as firearms recently purchased, security system upgrades and cash they’ve withdrawn from banks because they “know full well what’s coming next.”

But my moves – on the upside and downside – are fueled by the opportunities I see for gains, not by fear.

Bull and bear markets move in waves. And investors ride the rising and falling tides of green and red.

There are still fantastic companies trading at steep discounts. Many are at prices we haven’t seen in years.

So don’t panic. Be patient. Sip an extra glass of rum or wine. But keep your mind clear.

Here’s to high returns,

Matthew