Famed investor Warren Buffett once said, “Be fearful when others are greedy and greedy when others are fearful.” It seems like an appropriate quote for the last couple of weeks.
For the better part of two years, we’ve been concerned about and preparing for volatility in the markets. Now it’s upon us in spades.
The expected pullback that we’ve discussed is in full swing with fearful traders headed to the sidelines.
As we suggested two weeks ago in our last update, we prefer an approach which seeks to sensibly take advantage of opportunities as they appear with a dollar-cost averaging strategy.
In the last couple of weeks, we’ve seen significant selling in global markets due to fears of a recession caused by the economic fallout of the coronavirus.
What we were not expecting was for Russia to part ways with the OPEC+ consortium of oil trading nations in an attempt to crush the U.S. shale industry.
Largely out of the blue, this has caused oil prices to crash. And it has had the effect of pushing other stocks down with them amidst the fear of a global pandemic – like a perfect storm.
But while we have still not likely seen the bottom of this market, what is becoming clear is that the two strategies of containment and social distancing, used in countries such as Taiwan and Singapore, seem to be proving largely effective in containing the outbreak.
And while some might wonder whether the dramatic economic and social consequences (with or without this approach) are as problematic economically as the disease itself, given the alternative at this stage, we really have little choice but to give whats worked elsewhere a go until the vaccines inevitably arrive.
As such, it’s reasonable enough to believe that such strategies can work here. So despite the economic and emotional pain that is about to be felt, we expect this pullback will once again remain a great buying opportunity for those with the guts and fortitude to stick it through.
Accordingly, at this time we are recommending longer-term investors, that have extra capital, or those that will qualify for investment loans, to more aggressively start dollar-cost averaging into equity markets.
As always. If you have questions or concerns about your individual portfolios, you can call us at any time.
Mark, Sean, Cass, Simone & Nancy