You can’t have missed the headlines screaming about the FTSE 100‘s worst day since 1987.
That day was Thursday, 12 March, when London’s top index lost 639 points and ended the day on 5,237.5. That was a 10.9% fall, and was indeed the biggest one-day drop since 1987. In the USA, the Dow Jones and the S&P 500 suffered their sharpest daily falls since 1987 too.
But the worst day? That depends on your viewpoint.
FTSE 100’s worst day?
Did you sell all your shares during Thursday’s panic, shares you’d previously paid much higher prices for? Well, if you did, I think it’s fair to say you had a bad day. It might even have been your worst for some time. And you might be shaking your head and sucking your teeth when you see the Footsie bouncing back today — it’s up 7.3% at the time of writing.
Did you perhaps manage to sell right at the bottom, through pure bad luck? We can’t know yet, and there’s a very real chance we could be in for further falls. So there might be even worse days to come for investors who see this as a time to sell.
But what about investors with a long-term horizon, who see the FTSE 100’s so-called worst day as the kind of buying opportunity that comes along only once every few decades?
On Thursday, while many were selling, plenty of investors were buying Aviva shares. They’d have picked them up for around 272p, a full 33% cheaper than before the coronavirus crash. At Thursday’s low price, the forecast Aviva dividend would have spiked to a yield of 11.7%.
Now, forecast dividends aren’t set in stone. And there’s no guarantee that Aviva will be able to meet that forecast, especially if its business is knocked by the pandemic. But insurance companies work on expectations of regular crises, and they tend to be very good at generating cash over the long term. An Aviva top-up is very much on my wish list.
And have you seen what’s been happening to the UK’s housebuilders? Dividend yields were already high as Brexit-fuelled property fears were holding share prices back. But we have a housing shortage amounting to probably more than a million homes in the UK. That shortage will still be here after the virus has disappeared, and after Brexit has become a historical fact.
Meanwhile, Taylor Wimpey shares were also down 33% during the panic, and the forecast dividend yield has been pushed up to 12%.
It’s the same across the index. Whatever the sector, I see solid companies whose long-term prospects really haven’t been damaged much at all. And their shares are selling for 20%-30% or more below their prices of just a few weeks ago.
Best day since 1987
My plan over the coming months is to keep on buying shares, and grab myself some considerably better long-term dividend income than I’d have got a month ago.
So, the FTSE 100’s worst day since 1987? For long-term investors, I say Thursday was more like the best day since 1987. And things might even get better.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
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Alan Oscroft owns shares of Aviva. 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.