For two of their latest updates, Mancell Financial Group discuss the recent market recovery following the crash in the wake of COVID-19 uncertainty.
“The market bounce has been significant. 30-40% falls have been countered with 30-40% gains. Some markets are almost where they were on January 1. Some companies are making all time highs.”
But not everybody is winning. Many people panicked and decided to cash-in as the value of the markets began to tumble back in March.
“Scan any internet investment forum around mid-March. It was bedlam. Books on behavioural psychology could be written from these historical records. Panicked investors switching to cash after big losses. Assuming bigger losses were to come. Others were more confident in their selling. Deciding it was safer to let COVID-19 play out. They planned to sit in cash until the dust cleared. When they received the signal, they’d be back in.
“The only thing more agonising than watching the market tumble while you’re in it? Watching the market fly upwards when you’re not in it. On March 23 the bottom was in and the mother of all reversals started. The Dow Jones in the US saw a 23% increase in four sessions.”
Market Recovery Could be a Bumpy Ride
But that’s not to say that this current wave of market volatility is over. The road to market recovery may still be a bumpy one, especially as the impact COVID-19 has had on the global economy becomes clearer.
“While volatility will rear its head, and there will be further sell offs, that doesn’t mean things won’t continue to improve in the background. In the aftermath of 2008-2009 there were ongoing doubts about the recovery. Experts peppered us with their belief that bigger and badder things were to come. Bigger and badder things never eventuated. The investors who sat on the sidelines expecting the next big one eventually started moaning they weren’t getting a good return. They forgot an increased return requires increased risk.
“There won’t be any shortage of opinions and hot takes about market direction. Few will be talking about the upside. The best course of action is to do nothing. Our investments won’t always behave how we want, but how we behave will be much more important.”
You can read the two articles from MFG in full:
As always, if you have any concerns about your own investment portfolio then please feel free to get in touch.
Baldwin Financial Services is based in Prospect in the northern suburbs of Adelaide.
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