Start buying stocks! (diversified, and in tranches, over the next several months)
The Coronavirus has developed into a pandemic. The result on the stock markets: a panic.
At Vladeracken Asset Management, we look at facts and take only facts into account. We avoid emotional actions. We have started increasingly buying stocks.
The facts are that the virus is spreading and, increasingly, people get infected. At an approximate rate of around 4%, people decease following their infection. So far, the world has seen 5.000 deaths. Most of the deceased were elderly and/or with prerequisite symptoms. This is bad news. The good news is that, of the 126.000 known cases, 68.000 people have already recovered.
Another fact is that government actions are increasingly reducing human contact.
We can therefore reasonably expect that, like in China, Singapore and Hong Kong, the spread of this virus will, at some point in the near future, be limited. Also, as Bill Gates pointed out recently, a vaccine is being developed and could be ready around the summer period. There might even be a 'spring-effect' where the virus could decrease it's rate of spread, if it indeed shows similarities with other well-known forms of influenza.
The stock market's reaction, on the other hand, is quite dramatic. Most indices are losing 20% or more, year-to-date. This has happened before and will most certainly happen again in the future. How long will it take? Nobody knows.
But how did the markets fare after every stock market decline in history?
Let's take a look:
This chart includes every negative historic worldwide event of the last 50 years, i.e. economic recessions, political crises, natural disasters, financial meltdown and so on.
With these facts on our side, our recommendation is clear: start buying stocks, well diversified, not all at once, but in tranches over the next several months (or even year).
The result will likely be a pleasant one, looking back a few years hence.
Disclaimer: The author is Investment Manager with Vladeracken BV, an asset manager licensed by the AFM. Vladeracken invests or has invested on behalf of it's clients in equities. These writings constitute no investment advice. He or she who seeks to invest in securities does so on his/her own risk. The author and Vladeracken can in no way be held responsible or accountable for the contents of the writings above. Equities are considered to carry a high degree of risk.