Should people invest in the stock market during this pandemic?
- On February 19, 2020, the stock market S&P 500 and Dow Jones were at a record high of 3,386.15 and 29,348.03 points respectively. By October 2022, the stocks had risen to 3,700.81.
- On Monday, March 16, 2020, the biggest one-day market plunge caused the Dow Jones Industrial Average to fall almost 3,000 points. Next to the 1987 “Black Monday” crash, this was the highest percentage decline as the Dow closed 12.9 percent down. Following suit, the S&P 500 index also fell 12 percent.
- Since the coronavirus-related stock market March crash, the Labor Department reported a record-shattering 3.283 million Americans had filed for unemployment by April 2020. By October 2022, the unemployment rate had dropped to 3.5%.
- With an average annual return of 9.8% since 1928, the S&P 500, the Index Fund Advisors calculates that it would require 2.7 years for S&P 500 to rise the depleted 28.8% and for investors to recoup the gains from the February 19 peak.
Over the decades, the United States economy experienced staggering stock market highs as well as impactful lows. Those lows cause many to see drops in job security and incomes. The most recent low the United States experienced was the Great Recession of 2008. In the short run, investing during this pandemic amidst all this turmoil and social hardship may be difficult, but investing, despite the uncertainty and unpredictability, can still pay off.
Warren Buffet, one of the greatest investors in America, has a tried and true investment strategy: buy low, sell high. The strategy instructs that investors begin investing while stocks are cheapest so the returns are high when you hold them for the long run. Currently, with this pandemic occurring, numerous stocks have dropped due to people being fearful. The stock market itself is dropping precipitously. Economists warn that a recession is on its way soon.
As scary as a pandemic is, the opportunity to capitalize on the potential recession should generate some excitement among investors. An important thing about an economy to always keep in mind is that it eventually balances out and corrects itself. Before this virus, the US and world economies were doing relatively great. In the US under President Trump, the economy was strong, unemployment was low, wages were steadily rising, and even minorities were reaching unprecedented heights. This was an economic high after America went through a deep low in 2008. With the risk of another recession, stocks are available for cheap. If one purchase and holds on to those cheap stocks, they'll greatly reap the rewards. Our economy has always recovered from a recession, and that won't change. People should invest now while the opportunity is available.
Due to the coronavirus pandemic, the worldwide economy has taken a dive. Over the weekend, oil prices careened 25%, and stock-market futures plunged dramatically enough that the exchanges shut down. The entire United States Treasury yield curve fell below 1% for an historic first. The crash is severely felt by individuals, retirees, and dependents as governments enforce strict sheltering measures, resulting in an economic shutdown to hopefully decrease the virus's spread. The market could rebound as countries get the worst of the epidemic behind them and economic regulations are enacted. But which one? Nobody knows.
'After a crash of this magnitude, market confidence usually does not return quickly. So, it is better to wait for calm before taking big investment decisions,' says Anil Sarin, CIO of Equities, Centrum Broking. In this volatile market, experts cannot even predict the long and short-term changes that await us. Generally, investing in the stock market is always a gamble. One would need to risk big to get a significant amount of money back.
According to stock market and trade author Mark Minervini, 'Trying to play breakout stocks in a market like this is greedy and foolish. Bottom fishing is also a dangerous game that few do successfully. Be patient; wait for stabilization.' If one wants the cash to work for their investments now, tuning out might be impossible. This is why financial advisers advocate selling equities and bonds as they progress toward retirement or to a fixed monetary income.
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