COVID-19 is crashing the global markets but history has shown that the markets bounce back again and again over time.
Coronavirus is crashing the global markets but investors are returning to China. It looks like the appetite for Chinese shares is rising again. For example, Pinebridge Investments from New York. According to CNBC this firm “had total assets under management of $101.3 billion as of the end of last year, including $25.5 billion in stocks and $64.3 billion in fixed income.”
Despite the fact that the novel coronavirus is crashing the global markets fund managers start buying Chinese assets again. And all Asian markets rise moderately.
Major markets in Asia were up nearly 1% yesterday (Tuesday, March, 30) and Hong Kong and South Korean shares rose about 1.5%.
Fund managers have recently boosted China A-shares. It was “a small single-digit” starting position and now is “a low double-digit weighting.” So we can conclude the Far East, led by China, is already showing recovery.
China President Xi Jinping presented strong growth signals. Goldman Sachs reported the Chinese policy is concentrating on demand. Also, the government’s concern is to sustain employment, financial markets, trade, and foreign capital.
Russian financial market
On the other hand, the Russian economy has been shaken by the coronavirus pandemic. The main impact on the Russian economy came from the breakdown of the production pact between Russia and Saudi Arabia. This was a shock for traders all over the world. The consequence was intense volatility on the Russian stock markets which dropped around 20%. The value of the ruble also is down around 20% from the beginning of this year.
The price of oil futures is rising
Coronavirus is crashing the global markets but recently the analysts showed some optimism toward financial markets.
Oil futures surged on Tuesday after dropping to their lowest levels since 2002. Maybe the oil prices allow the best check of how investors anticipate the economy to function. The rising price of oil futures is probably a weak sign because on the other side we have gold as a standard safe-haven investment but the price of gold dropped significantly in trading on March 30.
When coronavirus is crashing the global markets it looks like there is no safe place to put money. Another safe place was longer-term U.S. Treasury bonds, also known as T- bills, but it dropped also.
Investors’ worries have not gone away yet. The stock market is still volatile. The VIX index is still at historically high levels. It fell a bit two days ago but this level still shows an extreme stock market volatility.
Coronavirus is crashing the global markets – what investors should do?
Here is what investors should do while the coronavirus is crashing the global markets. First of all, every single investor must understand the value of the overall portfolios is lower. But it is a paper loss, why would you transfer it in true loss? That is exactly what you would do in case you try to sell. So, sit back and do nothing. Don’t check your portfolio every single day. Put away your desktop or laptop computer and turn off notifications on your phone. The time for your reaction has passed anyway. You can’t do anything now. Just try to stay calm and avoid stress. As a serious investor, you should be prepared for market volatility. Even for this extreme one, that we have now.
Market volatility is a good time to start investing
If you can’t sit in peace, start small and not frequently. For example, buy a small chunk of stock per week. And repeat it until you buy what you want. Diversify your investments across major asset classes, don’t buy from the single one.
This period when the coronavirus is crashing the global markets is a good time to enter the market. The stock prices are low, you don’t need too much money to buy them and you can start with small parts buying from time to time. This is a great time to estimate your personal risk tolerance. But you have to follow some rules.
The rules to follow when the markets are down
As we pointed before, invest gradually. This means you have to invest a predetermined amount into the same asset over a long time. In this way, you’ll be able to buy more chunks at lower prices (we suppose you want to buy stocks when the price is low, that’s the rule of investing – buy low, sell high, right?) Thus this method will allow you to buy less when the price is high. So, even if you are a total novice in the stock market by doing this you’ll implement one of the most efficient strategies – a dollar-cost averaging.
When you estimate where to invest try to find and pick the stock for long-term investment. That’s the reason you shouldn’t start investing if you don’t have saved and put aside cash equal to at least three months’ salary. You will need that money for rainy days. You can invest the rest of your money.
Compound interest and diversification
Keep in mind the advantage of compound interest. That’s when you earn interest on the interest you receive, but you must have an investing plan and stick to it. And the mother of all investments, diversify.
Diversification will give you more exposure to a wide range of stocks.
Remember, the current market drop can give you a very good opportunity for young and new investors who can play for a long time. All researches highlighted the young people who invested systematically during market corrections and during the market downturns done better than the others who withdrew.
The existing investors should hold their investments tight. Remember, this period when coronavirus is crashing the global markets is just a stress test. Nothing more. Don’t let your emotions lead you, don’t sell your shares in a panic. Sell only if you have some urgent need for cash.
It’s impossible to pick the market bottom. Resist those thoughts. If you want to trade the stocks you can learn more in the “Two Fold Formula” book. Also, you can check it with Etoro virtual trading system.
Coronavirus is crashing the global markets, that’s the reaction of the market to the spreading of a pandemic. From some point of view, it was expected. A virus outbreak can cause many problems. From day-to-day individual activity to global productivity. This new COVID-19 virus changes the economic outputs since it is progressing in almost every part of the globe.
The investors are reasonably worried. The broad disruption to global trade could have a large influence on global growth. Along with these fears in the financial markets, the fears for individual safety is due to the threat of the virus itself. This level of fear may cause even the most rational investors to play by emotions. As negative news appeared the investors with lower risk tolerance started to sell in panic. And as it was expected, they caused a market correction. Just keep in mind, the market corrections are normal even in a bull market. The market needs to neutralize bad behavior. For example, FOMO. But the market will move forward despite anything. The markets will bounce back again. Also, it will be more sustainable. It just needs some time to catch a breath.