Nobody was expecting that coronavirus pandemic will lead to such a serious crisis, throwing world markets to a chaos. Now we see that this pandemic caused double-digit daily drops every day and as a result, now it is very difficult to find a good and safe market for investing. Despite this, some market specialists believe that it could be a good idea to invest in market downturn.
The S&P 500 lost a fifth of its value in the first quarter of this year, which is its worst quarterly fall before the global economic crisis.
In the short term, the economic crisis has made it much more critical than before to have a cash buffer if you encounter rough times, such as an employment downturn, in the near future.
But, above that, people were still asking where they should search for returns. At present, shareholders are split on the business outlook. To others, the US $2.2 trillion stimulus package signed Friday expects optimistic strides forward. Others, however, assume that there may be more to come.
Freddy Lim, Chief Investment Officer at StashAway, digital asset manager, said the latest data points to a fairly short-term market downturn rather than a more bear market. Although Samuel Rhee, Chief Investment Officer at the digital financial advisory firm Endowus, says a lot still depends on the U.S. solution.
Nonetheless, they were adamant that this is now a great time to focus on investment and business opportunities.
“Good long-term investment returns are born in the midst of these horrific circumstances. It’s a kind of chance once in a decade,” Rhee said.
Invest in market downturn
For those already interested in the market, that involves keeping your nerve and maintaining your contributions. For those outside, that involves getting started when assets look under-priced.
In the last big economic recession, the global financial crisis, those who remained investing in the S&P 500 posted twice the gains of those who switched to cash in as little as 3 months, as shown by data from Syfe and CBOE.
Although the current recession misses the financial foundations that triggered the GFC, Syfe CEO Dhruv Arora has said that the data shows the benefits of long-term investment.
“Nobody really actually knows when we’re going to hit the bottom of this present situation, but we agree that remaining committed and diligent pays off,” Arora said, recommending a diverse mix of stocks, bonds and other asset groups.
Although stocks have been plummeting during past few weeks in the midst of coronavirus-induced economic uncertainty, CNBC Make It advisors concluded that they have a good investment opportunity — especially as many are now selling below their real value.
“We assume that equity is the only game in the world,” said Wey Fook Hou, Chief Investment Officer at DBS Bank, showcasing stocks that are exposed to solid fundamentals such as U.S. e-commerce, healthcare and millennial consumption.
Steve Brice, Chief Investment Strategist at Standard Chartered Bank, accepted technology and healthcare stocks are expected to grow as a result of epidemic and prevention efforts, like growing remote work. But he warned that they would still have to fall.
“It’s also likely that there will be even good entry opportunities in the following weeks as the recession progresses,” Brice said.
Bonds, or fixed-income securities, however tend to be an appealing shield against stock market uncertainty, advisers stated. This is because the profit they give is inversely associated with interest rate changes: as interest rates drop — as they have done worldwide after many central bank cuts — the bond yields rise.
“Sharp dislocations in the bond markets and monetary policy reaction have contributed to a reset, and the bond market seems like a strong safe asset class to stay invested,” said Endowus’ Rhee.
Brice approved, emphasizing Asian USD bonds and evolving US USD government bonds as unique picks.
Other assets, like housing and goods, will help to diversify your investments.
Gold, in particular, may be a pretty good choice, Rhee said, as it offers a protection against the US dollar. Although, the “zero yielding asset class” assignment to gold and silver should be kept low, he added.
In terms of different geographical areas, the experts stated that asian countries, originally at the frontline of the crisis, looks set to recover first.
“We think a lot of negatives have been priced,” said DBS Hou. “In fact, we see value in China and Singapore markets as they trade close to / at GFC level.” Despite this, many actually agreed that the Unites States will start to be appealing as soon as it gets a grip on stabilizing case numbers.
Although markets are expected to remain unpredictable for a certain time to come, the consultants have concluded that now is a very good time to invest in market downturn.
One of the easiest entry paths for new investors can be through a digital wealth manager or professionally managed index funds. Thereby, investors will concentrate on their long-term goals instead of on short term financial needs.
“The secret would be to begin small, to recognize your risk level, to do your thorough research … And remain diversified, “said Evy Wee, head of financial planning and personal investment at DBS.
“We don’t know how much longer the pandemic might last, so it’ll be important to spread your dry powder over a longer period of time than to spend 100% of your cash in one step,” she said.
“Investing with money that you do not need in the shorter term and taking a long-term strategy to reap the advantages of compounding over time.”