Every previous depression, recession, or one day sell-off has been caused by things like over-valued stocks, improper economic or financial policy, weak banking regulations, or some other economic, financial, or legal reason — therefore, those financial crashes were caused by an organization, a regulator, or a person, doing the wrong thing.
Consequently, the corrective action and the time lag involved to get the market back up to where it once was, involved many months, or even years of tough slogging.
But in this case, nobody did anything wrong; There was no over-valuation, no wrong-headed government policy or weak banking regulatory environment, nor were there illegal actions by individuals behind the cause of this particular market adjustment. No matter the numbers… there’s only one reason for this massive and unprecedented market value writedown, and that is fear.
Fear of investors losing the value of their stocks (due to the Coronavirus scare) is the only thing that’s caused this financial meltdown — therefore, once that fear subsides at approximately the same speed as the Coronavirus subsides, the market should then respond very strongly and March 2020 will eventually register as a tiny blip on the year, and my guess is that the Dow Jones Industrial Average will return to 29,000 points or more by the end of 2020.
As no systemic economic, financial sector or banking regulatory problems are to blame for this particular crisis, global stock markets should rebound as soon as the Coronavirus has run its course.
Well, aren’t you sitting pretty! 😉
If you pulled all your money out two weeks ago, or even as late as week ago, you now have a pool of money that you’ve already made profit on, ready to reinvest in the market just at the time stocks are priced at fire-sale prices!
Oh, yes. Oh, yes, Oh, yes! You are a lucky investor indeed.
And I suspect that there are millions of such investors around the world at this time and I fully expect that once the Coronavirus has run its course through the population, investor confidence will return like a hurricane on steroids.
Think of all that investment hitting the markets over the next few weeks. ‘It’s a beautiful thing!’ as Donald Trump would say.
If I’m right (and we’ll soon see) it will demonstrate the perfect example of the ‘Buy Low & Sell High’ strategy that’s been making individual investors and institutional investors wealthy since there were rocks.
If you did wisely ‘cash out’ your stocks over the past two weeks, you can now buy even more of your favourite stocks at their new, low price due to the Coronavirus market event and watch them return to February’s highs and more in the coming months and years.
If millions of investors do this as I fully expect they will; March and April of this year should barely register as a blip on the financial calendar in only a few short months, and investors will reap significant rewards over the coming months and years. And, good on you for being such prudent investors!
Until then, wash your hands often, maintain proper social distancing of about six feet, and don’t go on a cruise ship if you’re aged or infirm. Other than that, happy days for investors will soon return!
Written by John Brian Shannon
John Brian Shannon serves on the Editorial Board at kleef&co. John has contributed to the United Nations Development Program and to corporate blogs. Presently writing about Brexit at: LetterToBritain.com