What Should Investors Do Now?

Written by Steven Bouchey

Investors have experienced the fastest and most furious drop in the stock markets ever over the past few weeks. In hindsight, the lows of this sell-off might have been this past Monday when the markets were off -35% from its high, but we will have to wait and see, since then we had three days of a bounce including Tuesday when the Dow soared 11.4%, the best day in 87 years. But as good as Tue-Wed-Thurs’s green arrows were, Friday brought us back to reality with the markets selling off some and maybe mid-week was a bear market rally because of all the hype over the unprecedented $2t stimulus package which was passed by both the House and Congress.

The big question is “What should investors do?” Long-term investors need to take a deep breath and remember that they shouldn’t be invested for a day, week, month or year, its for a very long time and this market will recover and go on to make all-time highs once again. I always say that volatility brings opportunity if you aren’t fearful and panic by selling completely out of stocks. Now is a good time to reevaluate your portfolio, maybe get rid of some dogs and buy some quality holdings.

For investors who raised some cash during this downward spiral, you will need to reinvest those proceeds back into the markets when you are comfortable and that is usually days like Monday when there was blood on the streets. You may get another bite or two at the apple, there is so much we don’t know about how bad the economy is slowing down, how many workers no longer have a job or had their salary or hours cut so they have less money or worse yet, no money to put food on the table or buy other necessities. All these things will lower consumers’ confidence and consumers make up almost 70% of the economy.

What else can we learn about COVID-19 and what it’s doing to the world’s economy and peoples psyche that we just don’t know? That is the $64,000 question and in hindsight it will be crystal clear, but we must wait and see. Which is why long-term investors who are saving for their retirement, college or some other goal which is two or more years down the road should talk with their financial advisors in length before having any knee jerk reactions. I have reached out to our clients 7 times over the past few weeks, this is when they need my team and I the most. I tell every client we get paid to take the emotion out of the decision-making process.

The stock market is always looking forward at the fundamentals and we don’t know how much bad news is already built into it. Let’s face it, there is no surprise that we are headed into a recession if we aren’t in one already, corporate profits have to be affected except for a few outliers like Amazon delivering all of our goods or supermarkets that can’t stock their shelves enough, other than that just about every other industry has gone to hell in a handbasket.

So, we need to remember that when there is good news on the virus taking a turn for the better or investors learn that the stock markets were over sold, then the markets will take off and it’s what we call “easy money”. If you got scared and sold out of your stock holdings, then you won’t profit from the markets recovering their losses and they will recover their losses.

Don’t panic, stay invested is our motto, although we did take risk off the table a few weeks ago for our clients and we will be putting that money back to work when we feel the time is right. Patience is a virtue and looking at bad news on the financial channels is unhealthy, sometimes its best to forget you own stocks and take a peek over the summer or this fall, you may be happy you didn’t sell out.

Stay healthy and keep your families safe!

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This article was featured in The Troy Record and The Saratogian on March 28, 2020.