Barely a month after the markets sold off due to the #WWIII scare between the U.S. and Iran, markets faced another test with the spread of the coronavirus. How did it fare this time around?
It’s hard to believe the month of January is over! But here we are in February and the market has been consumed with the spread of the coronavirus in China.
When the coronavirus story broke in mid-January, the market quickly sold off about 4%.
Just like the scare with Iran several weeks ago, the sell-off was driven by the unknown: “How bad is this going to get?”
While the coronavirus is still spreading and playing out in real-time across the globe, the sense is that the situation is under control. The rate of the virus’s growth slowed, and markets responded.
Not only has the market recouped its losses but it has surged back to all-time highs!
“Buy the dip” doesn’t work all the time. In uncertain environments, investors look for an improvement in the “rate of change” before dipping a toe back in the water. The situation doesn’t have to get better; it only has to get worse at a SLOWER rate. That’s what seems to be happening with the coronavirus story.
Financial Media will scream that you need to “do something,” but more times than not the best strategy is to do nothing. Doing nothing doesn’t sound as sexy or exciting. But it’s a proven strategy for out-performing most other investors.
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