As the coronavirus spreads around the world, the economic outlook worsens and frantic stock selling has ensued, with some investors looking for safe-haven alternatives.
Does this mean Bitcoin and other cryptocurrencies are becoming desirable commodities?
I think not. I’ve seen the Bitcoin rampers and scammers out in full force in recent days, enticing prospects with their claims that “Bitcoin doesn’t spread deadly viruses, it spreads freedom! It doesn’t need to be disinfected and quarantined; it’s anonymous; it’s secure, Bitcoin will never rely on a bailout; it’s a truly global currency for all”. Bad taste as well as misleading!
Let’s be clear, Bitcoin mining is finite, it’s not environmentally-friendly, its transaction costs are prohibitively expensive and they’re not instant. It’s also ridiculously volatile.
I don’t object to cryptocurrencies as part of a larger pool of diversified investments, but I don’t think Bitcoin is the answer during a stock market crash. If anything, now is the perfect time to pick up stock market bargains for long-term wealth generation.
Recovery is inevitable
Yes, financial markets are in free-fall and the dents in shareholders’ portfolios make us nervous. But equities are based on real-life, tangible businesses. This means they’re worth something. Many of these companies have had their paper value pulled down a notch or two, but most of them can and will recover.
We still don’t know enough about coronavirus to predict how long the downturn will last. This means I’d be reluctant to start buying stocks just yet, for fear of generating instant losses.
Equally, I don’t think it’s a good idea to sell shares right now unless you’ve already made gains and feel confident to do so. And current ‘losses’ are only on paper until you actually sell. Most of these companies will ride out the storm, and their share prices will come back with a vengeance.
Patience is a virtue
For long-term investors, patience, discipline and confidence are key to long-term security. The world’s most successful investors ride out market fluctuations and use the downtime to research companies and find those that can go the distance. I myself like companies with a strong track record and a decent dividend yield.
But with very few companies operating from an exclusively domestic supply chain, I think the coronavirus will affect most FTSE 350 businesses to some extent. How quickly they recover and get back to business-as-usual will determine how swiftly their share prices rebound.
Down but not out
One British stalwart I like is BT Group (LSE:BT-A), because although it has high debt and the increasing likelihood of a dividend cut, it’s got a lot going for it, I feel. That may surprise some of you. But BT’s current dividend yield is almost 11%, so even a cut will leave a desirable return. Its price-to-earnings ratio is 6 and earnings per share are 22p.
The FTSE 250 firm is also highly involved in cybersecurity solutions and in our progressively vulnerable world, this is a good business to be in.
A recent BT announcement that grabbed my attention was its decision to allow customers to pay for its prime TV offerings on a monthly basis, rather than a contracted package. I imagine this will be popular with Premier League football fans.
All-in-all there’s a lot to like about BT and I think its share price will recover.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.