Market Pulse: Looking back on pandemic
Special to the Tribune
A year ago the market plunged 34% in just 23 trading days as one-third of investors hit the panic button and sold.
While some had second thoughts and repurchased stocks, others didn’t. Emotions ran high. Here is what I wrote to my clients last March.
Investors want out of anything that trades. That’s why growth stocks, conservative stocks, bonds, utilities, munis, and gold are under pressure. Diversification hasn’t worked. Only Treasuries that yield next to nothing have held their value.
I’ve seen this before. I was an investment professional during the 1987 crash, the near bear markets of 1990, 1998, 2010, 2018, and the massive bear markets of 2000-02 and 2008-09. I handled some better than others, but let’s just say this isn’t my first rodeo.
In each case securities were sold to ridiculous levels that made no sense. I’ve learned to never sell into a plunging market that is well off its high. I won’t sell in that environment. Nope. I won’t be the emotional seller that blindly sells securities acting as if they’ll never come back.
Over the years I’ve seen many investors sell into a panic thinking they’ll buy back at a later time. That rarely happens. If stocks go down the investor only gets more bearish and after stocks go up then he doesn’t want to buy higher than where he sold. Selling is the easy part. Getting back in is far more difficult. That’s why most people that get out of the market won’t get back in.
The worst case was priced into stocks last year until the bottom in March, then investors began to change. In this column I wrote that investors would be well ahead of COVID news events and any sign of improvement would send stocks higher. Investors anticipated the vaccines and pent-up demand that we are now experiencing. Stocks rallied … a lot.
Remember how experts were saying that it would take at least 15 months before a vaccine would be developed? I’m not surprised that we are far ahead of that schedule. When something is in everyone’s best interest and there is no constituency for failure you should always count on a better than expected outcome.
It is constructive to look back and remember your emotions from a year ago when the outlook was so bleak. What investment decisions are you proud of and which do you regret? It is important to reflect on that because there will be more panic selling in our future. And you’ll be able to say, “This isn’t my first rodeo.”
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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