Plenty of sectors have been smashed by the bear market of the past two months.
Retailers, travel companies, leisure firms, holiday operators, REITs, and airlines – all have plunged with the advance of the coronavirus and the recession-summoning lockdown aimed at containing it.
Even higher-quality companies and century-old investment trusts are trading at sharp discounts to just a month ago.
And it all makes perfect sense.
This year’s profits have gone the way of the cancelled Tokyo Olympics for many companies.
A recession is nailed-on. The only question now is how deep will it be.
The future is highly uncertain, and for once that’s a phrase we can all relate to.
Forget figuring out the equity-risk premium – we just want to know when normal life will resume.
When can we go out for a pint of milk without feeling the need to wear a mask or having to swerve clear of anyone who gets in our way?
“If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder, and you deserve the mediocre result you’re going to get.” – Charlie Munger
Share prices have fallen to reflect the new realities.
The UK markets fell by as much as 30% at the worst point. The FTSE 100 is back at levels first seen in the 1990s – before some readers were even born.
The US markets posted their quickest drops on record.
Nobody needs to look to the history books any more to see what stock market panic and despair looks like.
We’re living it.
“When you’re going through hell, keep going” – Winston Churchill
The Motley Fool is an investing service. We live and breathe the stock market.
And while our first, second, and third thoughts are with our friends, family, and the caring professions who are helping us all get to the other side of the pandemic, the fact is investing isn’t something anyone should turn off when the backdrop gets too much to bear.
It’s hard to summon up the fortitude – or even the inclination – to think about your portfolio in the midst of a global crisis.
But the long-term studies we all draw comfort from when investing in shares – the ones showing how equity returns have compounded over the years to fund prosperous retirements, and shrugged off all kinds of upsets along the way – they presume you’ll keep investing through thick and thin.
For some people, having the nerve not to sell up in despair will be achievement enough.
But continuing with your regular monthly investments into pensions and ISAs and buying your usual funds per exactly the same plan you followed in the good times is even better.
As for us stockpickers, starting to hunt for good companies that are now trading too cheaply must be back on the agenda.
I’m not saying it’s the bottom for the market, or the economy won’t get worse.
I definitely don’t know when the virus threat will recede.
But I do believe life will go on, eventually. And that for many of us, our portfolios are crucial to providing the means we need to have the kind of life we want.
“People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth.” – Jesse Livermore
I understand you may feel it’s too soon to think about buying shares.
First, there’s a moral dimension. Should you be looking to profit in the midst of this horror show?
I understand the sentiment. However we’re not about short-term trading the headlines at The Motley Fool, or aiming to profit from the misfortunes of others.
We believe in capitalism’s potential to increase prosperity for all, at least in principle.
And we stand by the importance of the markets for raising the funds to help fuel progress, whilst enabling us all to enjoy a stake in that economic growth.
I believe looking for good places to put your money to work right now for the long-term should be no more unthinkable than working from home to earn money with your office closed.
On the other hand maybe you agree we should keep calm and carry on investing – in theory.
But in practice, you say, the market is too volatile, or the future too unknowable, or maybe even it is actually very blooming knowable and a deep downturn that will lay waste to our portfolios is clearly on the horizon.
To which I’d say, sure you could be right.
However as an investor in shares these things are always true.
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett
The future is always uncertain. The market always has the potential to be volatile.
And there are never any guarantees.
This was as true in February when many indices were hitting all-time highs as it is now in April in the midst of this vicious bear market.
The difference is we know a downturn of the sort we must always anticipate is upon us – but also that share prices have adjusted meaningfully to reflect it.
Of course we can’t know whether prices have fallen sufficiently, given the earthquake of an indefinite economic lockdown.
Equally we don’t know to what extent central bank stimulus and fiscal support from governments can help ameliorate some of the pain.
But we do know that in the past, buying shares when prices have fallen far from their highs has always paid off handsomely, eventually.
For me, that knowledge is enough to send me scouring the market for companies that can prosper when life gets back to normal, like we all wish it would.
Perhaps this time it will prove to be different.
But I wouldn’t bet on it with my portfolio.