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As I’m writing this (first week in March), the market is in the middle of some obscene volatility thanks to the coronavirus that has started taking over the world like the second coming of Genghis Khan. The crystal ball is decidedly murky on this one, so no telling what things will be like when you’re reading this in April, but here’s hoping the zombie apocalypse chapter story you’ve read in these very pages hasn’t been a massive case of cosmic foreshadowing!
Something I’ve heard a lot in the last week from clients is: “should we be selling stocks?” Perhaps you’ve had the same thought yourself. Fortunately, there’s a straightforward answer to that question: yes, you should sell. But, but....what about long-term investing and buying the dip and “the market will recover” and everything else people say? Irrelevant! Let me explain:
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What makes markets go up and down? Nobody really knows. It’s largely a psychological phenomenon that just happens, but that doesn’t sound particularly convincing if you’re on TV, so they come up with things like “it’s the robo algorithms” or “investors are worried about the increasing costs of doing business” - both of which are literal quotes I heard last month after the market’s worst-ever (at the time of writing) one-day point loss. Both explanations sound decently plausible, except that they’re not.
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