As the FTSE All Share plunged 8% this morning and I watched the live-ticker value go from -1.98% to -5.4% within ten minutes, I decided it was time to draw inspiration from Churchill’s Greatest Speeches.
Success is not final, failure is not fatal, it is the courage to continue that counts.
When you are going through hell: keep going!
I think in times like this you really need to find a well-spring of positivity from somewhere, in order to summon the courage to carry on.
For me I always loved the speech Churchill gave to the US Congress in December 1941, after the Japanese bombed Pearl Harbour and carried on to invade what was then called Malaya. It was not a speech of capitulation, instead it’s gristly and confident. Try to imagine this in relation to the current virus-outbreak, because this is the sort of tone we need to take:
“What kind of people do they think we are? Is it possible they do not realise that we shall never cease to persevere against them, until they have been taught a lesson that they – and the world – will never forget!”Winston Churchill
We need to face this infectious disease head-on, with all of the guts and determination that we can collectively muster. There is no giving in and running to the hills: the time has come to work as hard as possible to keep the economy and society functioning. Doctors, nurses, and healthcare professionals need to continue to go to work. Office staff need to work from home and strive to maintain the best service they can within the parameters of the crisis. The elderly need to self-isolate.
Whatever you do, how little or big, needs to contribute to keep the economic and social wheels spinning. Legal services, accounting, banking, child care, car parking; it all needs to continue to function. Within three or four months there will be a reprieve to new cases of Covid-19, even if the disease spikes again next year.
What about my investments?
Now it is certainly not the time to panic sell, nor is it the time to panic buy.
If you sell today, the market could scream back 7-8% tomorrow. If you buy today, over the coming week, it is entirely possible that we see another 10% fall in asset prices as society begins to temporarily shut-down. The best course of action is to sit tight and raise cash where possible – sell speculative bets, consolidate your portfolio, and hang tight until we have more certainty. Despite what Ray Dalio says, cash is now king.
Please follow our Market Timing Model for updates regarding where the market sentiment (for March 13th) currently sits, and where the market fundamentals (March 13th) are for any given week. We intend to run this series thoroughly and attempt to find the bottom of this stock market. It isn’t impossible to do, it just takes determination and a relentless focus!
The future returns on stocks and equities really are going to be brighter once we fully weather this storm. In a single, powerful thrust the market of wretched excess has been wiped out. Don’t expect a sudden rush higher yet and wait for the market to properly bottom-out.
As we predicted this is not just the end of the Bull market, this is in fact the end of “Buy the Dip” investing altogether. Investors need to start appreciating that value counts and mindlessly buying shares without an understanding of what their valuation is will not be a successful strategy moving forwards.
Data Driven Approach to Recoveries
I want to emphasise that this is a public health crisis and our attention should be focused on surviving it and not capitulating – anything. I intend to work from home and work hard to keep my business and my family moving along and running, and I encourage everybody to do the same while keeping safe and healthy.
That being said my objective is to look after my own savings, and in turn to help you with yours. So I need to stay objective and comment on what you can do. The problem is that fundamentally there is no precedent for this stock market crash, and the economic effects of it, so we really are in unchartered waters.
Here is a neat summary of previous market crashes since 1929:
The left graph summarises the peak-to-trough market declines during the 1929, 1987, 2000, 2008, and 2020 stock market declines. Notice that we are approaching the levels of the 1987 and 2000 crises. That suggests to me that we may be shortly entering into a 35-40% decline in European indexes, and before long a 30% decline or more in the S&P 500 and Dow Jones / Nasdaq.
The right graph summarises the time, in months, that the crash lasted. The worrying thing is that even the 1987 crash lasted three months. That tells me that we simply need more time to assess the damage before jumping back in head-first.
There will come a point when panic selling starts to peter out, and when that moment comes, you need to be ready to buy and buy hard. But not yet.
Channel that courage to weather the storm and pick a moment over the next couple of weeks, and months, to start putting capital to work.
Follow the Market Timing Model and our weekly updates to get the latest news on where the market valuations sit. Access to the full model is free at this time and only requires you to sign-up to our newsletter.
On that subject: sign up for our weekly newsletter to stay informed over the coming weeks.
Most of all stay healthy & try to keep a rational head during this time of enormous difficulty!
About the Author: David began Frugal Investors in order to help others learn about smarter money management – today. He has spent nine years working as a senior process improvement professional and has extensive experience helping FTSE 100 and Fortune 500 businesses to improve their efficiency, quality and speed of delivery.
Over that same timeframe he has built up a £1mn+ portfolio of stocks and bonds through self-directed investment. Follow David as he uses thorough, detailed investment research aimed towards accruing £2,000,000 in investable assets within the next ten years.