As the stock market fluctuates wildly in response to the coronavirus outbreak, oil price rout and banking uncertainty, many investors are questioning how to respond to this continuing market crash.
Panic may be the most obvious reaction, but it’s by far the least helpful.
Once you’ve sold your stocks and shares, that’s as much as you’ll get for them. Paper losses become real and there’s no going back. It’s been well documented, but I’ll say it again, successful investors hold until the worst has passed.
An end to Covid-19 is not yet in sight, so worry is having an unprecedented effect on society. Predicting what’s in store for world financial markets is a guessing game for now, but both China and South Korea are showing signs that the outbreak is slowing, so hope remains on the horizon.
Oil prices collapse
Although I don’t think you should panic-sell, I equally think it’s a bad idea to buy oil stocks right now. Although the price of oil has been hurt by reduced demand in response to coronavirus, this is not the only reason for its demise. OPEC wants to cut production, Russia won’t agree, and now Saudi Arabia is slashing its prices because it can, throwing more uncertainty into an already unstable situation. Today the price of oil experienced its fastest drop since 1991.
For these reasons I foresee wild fluctuations continuing in the oil industry and would prefer to steer clear for now. The Premier Oil share price was down over 83% earlier this morning. Now it’s down 52%, this demonstrates the volatility in the markets today.
Best shares to buy today?
Panic aside, a market crash provides the perfect opportunity for calm and sensible stock-picking while prices are low.
Some UK-listed share prices have taken a hammering in recent weeks. From the FTSE index, the Lloyds share price has tanked 35% year-to-date, the Tesco share price is down nearly 7% in this time and Flybe has gone bust.
Flybe has been the first airline casualty, but it may not be the last. Most of its routes were picked up by other airlines within hours of going into administration. I think this proves how saturated the airline market is.
Personally, shares I continue to like are BT for its specialist interest in cybersecurity solutions, along with pest control and hygiene specialist Rentokil Initial, a FTSE 100 stock with a nine-year rising share price.
Share price volatility may well continue for a few more months until the extent of the virus outbreak becomes apparent in the UK and US.
That’s why I think the best thing you can do is hold tight and be patient. Don’t panic-sell and don’t buy for the sake of buying. Keep in mind that coronavirus could impact many companies’ supply chains, along with a sustained impact on the financial sector, tourism and leisure and the likelihood of an increase in insurance claims. If you’re feeling confident and have spare cash, then carefully update your stocks and shares ISA with a selection of company stocks you feel can go the distance.
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.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Tesco. 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.