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Forbes: The Coronavirus Stock Market: A Market Gone Wild

Originally published on Forbes.com.

Investing in the Coronavirus Market. Part 2

Remember the stock market peak of Feb. 19, 2020, when the S&P 500 index closed at its all-time high of 3,386.15?  

In “What Every Worried Investor Needs To Know About The Coronavirus Market,” my last market post of Feb. 28, 2020, we were in a correction (a decline of 10% or more), achieved by the S&P 500 index in just six trading days.  

The Bear Arrives

A bear market was developing. By March 23, 2020, the S&P 500 index fell 34% to a low of 2,237.40. That decline has lessened to 19% as of today (April 8), just 35 trading days after the Feb. 19 peak.  

In the interim, we’ve seen some of the most volatile trading days in history. Remember April 6 – just a few days ago? The S&P 500 was up 7 percent that day.  

March Made The Record Book

March 2020 made records: down 12.5% for the month, the 19th worst in history.

Looking at the top 30 daily movers (up or down), March landed on the “worst” list three times and the “best” list twice.  

To give you some perspective, since the 1920s, the worst one-day decline was Black Monday, Oct. 19, 1987 (down 20.5 %). The second worst was Oct. 28, 1929 (down 12.3%), and the third was in March 2020.   

The Best And Worst Days

Here are the worst and the best so far this year.

Worst: 1) March 16 (down 12%), ranked the third worst in a list of 30. 2) March 12 (down 9.5%), ranked as the sixth worst decline. 3) March 9 (down 7.6%), the 19th worst.    

Best: 1) March 24 (up 9.4%), ranked ninth best. 2) March 13 (up 9.3%), ranked 10th best. Then, another day in the top 30, April 6 (up 7%), which ranked 30th best. 

This table gives you all 30, showing the worst days (in %) and the best.  

Liquidity Is Being Pumped In

Congress and the Trump administration have been pushing out aid packages. First, there was the $8.3 billion aid package of March 7 and the $100 billion package of March 18. Then, on March 23 – which in hindsight set a bottom for the S&P 500 looking back from today – the Federal Reserve announced asset purchases to ensure that financial markets keep functioning properly. 

Is March 23 The Bottom?

With some major swings along the way, the market has been moving upward since March 23. We don’t know yet, where the market is headed. What we do know is that looking back from today (April 8), March 23 is the lowest the S&P 500 closing price year to date.

A single day can make a difference. If you go to cash on one of the worst days, you could easily miss one of the best days. 

A Bumpy Ride Is Ahead

Is smooth sailing ahead? Not just yet. According to Sam Stovall, chief investment strategist for CFRA, “investors are advised to fasten their safety belts, because it’s likely to be a bumpy quarter.”

Why? First-quarter results are projected to report year-over-year declines, according to S&P Capital IQ consensus estimates. 

Quoting Stovall, “Sixty-four percent of the 11 sectors in the S&P 500 are projected to be in the red, led by double-digit declines for consumer discretionary, energy and industrials, while consumer staples, health care, information technology, and utilities should show increases.”

And further, [O]nly 41% of the 126 sub-industries in the S&P 500 should show Q1 EPS gains, led by gold, diversified chemicals, and oil & gas refining & marketing, while airlines, copper, department stores, and leisure products are projected to post greater than 100% declines.”  

Long-Term Investors Have A “Buy List”

We don’t know yet if March 23 will be THE bottom for 2020. But we do know that long-term investors look to add to their portfolios when prices are lower.

This is the time to investigate what you could purchase over time as this market continues to find its footing - with the understanding that buys may be cheaper if the direction of the market changes.   

It’s time to prepare a buy list if you haven’t done so already.  

The Outlook

One resource for stock selection is the The Outlook, published by CFRA Research. Now would be a good time to take a look at it, as you can benefit from a free trial. You can link to the offer here.

The Outlook was first introduced in the 1920s and is the oldest continuously published investment newsletter in the U.S.  There you’ll find stock research, model portfolios, and commentary.

We’ll talk more about other stock research tools in later posts. Write to me if you have favorites that you would like to discuss. My email is readers@juliejason.com. When you write, please tell me the city and state you live in.