Playbook for Investing Amid the Coronavirus

A recent article in Forbes compares the current investing backdrop to that of 9/11 and the financial crisis of 2008.

Following are highlights from the article:

Current situation versus 9/11:

  • “From a stock market perspective, comparisons to 9/11 are not entirely apples-to-apples,” the article says, but adds that the level of fear and uncertainty “does have parallels with today’s fears of a microorganism about which we know little.”
  • Today’s economy is significantly stronger than it was in 2001, but “fear of the unknown, particularly of what will come next, is striking terror in the hearts of average citizens as well as the financial community.”
  • Two weeks after the 9/11 attacks, the article notes, “the market regained a good chunk of the post-tragedy losses.”
  • Since World War II, there have been nine major crises besides the current pandemic. The article notes: “During each crisis investors felt confused, uncertain and panicky. Nothing in their experience, they believed, would help them cope with the ominous world they faced. Typical advice they got: ‘sell now, before it’s too late. Save what capital you have left.’ This advice turned out to be completely wrong. It is foolish to sell into a crisis.”
  • With only two exceptions, the Dow bounced back a year after every crisis:
  • “Of course, nobody can be so prescient as to know when the exact bottom will be reached and get 100% invested then. But even if you missed the bottoms, your gains remained impressive.”

Current situation versus 2008-2009:

  • “The 2008-2009 panic differed from our present situation in one important way: the problems facing the market could be solved by fiscal/monetary policy. People did not fear for their physical safety: instead, they feared the prospect of imminent economic ruin.” The article outlines a timeline “showing how the landscape of Wall Street changed forever over the course of just 90 days.”

The article concludes with a list of names that could present opportunities for investors (including UPS, Home Depot and Cisco) but emphasizes, “We are certainly not calling a bottom here—investors should proceed with caution. However, we do believe that over the long term, investors should be rewarded for dipping a toe in the water.”