Buy, Sell, or Hold During COVID-19

A decade-long bull run on Wall Street has come to an end in the most abrupt fashion in history.

The COVID-19 coronavirus driving the sell-off will probably not resolve itself overnight. We do not know just how much the coronavirus will impact the economy in the long term, but all signs suggest that it will continue to affect the market in the short to intermediate term. 

With this much doubt, should one be a buyer or seller of stocks at this time?

Stocks are suddenly not as costly to buy, however as we typically see, there’s a lot less interest in purchasing stocks today than there was when valuations were higher.

In January, when the coronavirus was surfacing in China, the conversation was concentrated on whether the epidemic could eventually impact the U.S. markets. We now know for certain there will be a material influence on the U.S. market. Irrespective of how deadly the virus ends up being, the coronavirus epidemic of 2020 is currently creating a far more serious impact on the market compared to previous outbreaks such as SARS.

Wall Street historically is focused on quarterly results, and this present quarter will be difficult for many sectors in the market. However, there’s nothing so far to imply that there’ll be a permanent effect on our economy or that earnings won’t eventually recover. If you’re an investor with a time horizon measured in years, rather than the quarters, then the current sell-off provides opportunities to purchase quality businesses at a discount.

Many sectors of the market will be harder hit than others. The travel sector could take well into 2021 until it recovers. That being said, even the the airline and cruise industries, where several stocks have dropped more than 35% in 2020 have long-term trends that should still dive growth in the coming years. 

Even if you don’t have the stomach to get into the downturn, it is possible to still come out ahead by avoiding the desire to sell. Between May 2008 and February 2009, the S&P 500 lost nearly half its value and many investors decided sell out of all of their stocks. That was a costly mistake as over the next 5 years the S&P 500 increased over 153% percent.

The best way to generate money on the long haul is to stay invested through ups and downs, either in individual stocks or commingled vehicles. 

It is an interesting time to be an investor. I know that many household are feeling the weight from what has been lost in recent weeks. But the market will rally again, and if history is a guide that rally will more than make up for recent losses.