We have had 7 consecutive days of 1000 point Dow swings, and on track for an 8th, in what is appearing to be the most volatile trading month in US public equity history. The novel coronavirus has sent our market into a fear-driven tailspin. As a long-term investor and short-term trader (when times are as volatile as these), I have been perpetually on the edge of my seat, staring at the markets every tick.
This is a once in a lifetime trading opportunity for those who can position themselves well during these times of insurmountable uncertainty. I can barely sleep at night, thinking about what unexplainable moves the markets will make the following day.
Today we broke through the Dow’s 20,000 level, which was a milestone this index hit over 3 years ago. The markets are still worried that this virus is spiraling the world into a recession, and the global financial markets are already pricing this into stocks.
I have been largely holding off on buying long term equities until this week. After Monday’s record “market crash,” representing the second-largest one-day market drop in history, I am ready to start thinking long term.
Over the past month, all the major US indexes have fallen 30% from their all-time highs, which was the most rapid stock pullback ever. We are now deep in bear market territory with little hard data supporting this. This is because the economic data has not had time to be released, and the coronavirus’s impacts are just beginning to be seen.
The markets are forward indicators, meaning that investors and traders are attempting to predict the economic impact of this pandemic. In my opinion, the markets fear-driven trading has priced in the worst-case scenario. I am not calling a bottom to this “market crash,” but I believe that there are a lot of equities out there that are trading far below their intrinsic value and that it is time to buy. A generation that has seen 2 economic fallouts in the past 2 decades is being overly cautious.
From here on out, I will be buying on every red day in the market price-averaging down as I go. There is so much long-term potential in the markets right now I can hardly stand it. I can stomach the short-term volatility knowing that the long-term returns will be substantial. I will bleed red until this market turns around.
Here are the positions I put on today:
Disney (DIS - Free Report) below $90
Nvidia (NVDA - Free Report) below $200
Microsoft (MSFT - Free Report) below $140
QQQ (QQQ - Free Report) around $170
Positions I am contemplating:
Splunk (SPLK - Free Report) below $100
JP Morgan Chase (JPM - Free Report) below $85
Economic stimulus is underway with the Fed buying up $700B in commercial paper, which matches the measures taken in 2008. This will allow businesses to maintain their balance sheet’s health.
The Fed is also providing two $500 billion in repo to support banks’ short-term funding. This will allow banks to remain liquid and well-capitalized.
Fiscal stimulus is now up to bat with President Trump and congress rushing to come out with a plan to help the average Joes who can’t pay their bills and potentially support some of the industries that are suffering the most from this novel pandemic.
A robust fiscal stimulus plan that will ensure support for the suffering businesses may be enough to reverse the market’s current course.
The most important thing that we should be doing during this period of pandemic fear is keeping ourselves and others safe. While you are executing lucrative trades and investments, ensure that you are consistently washing your hands and staying socially isolated. We will overcome this virus and its market impacts, but it will take everyone working together to get this done.
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