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. The recovery has seen the best 50-day period in US market history.
This doesn’t occur without exuberance.
There has been lots of irresponsible media coverage. Interviewing celebrities and sports stars on their day trading. In the US, share prices of bankrupt companies have been run up by inexperienced investors. Car rental company Hertz spiked 1400% after bankruptcy. In another notable instance, bankrupt South American airline LATAM was bid up nearly 200%. What many investors didn’t know about LATAM, was that it was about to be delisted from the mainboard of the New York stock exchange. Relegated to the OTC markets that some brokers don’t have access to. Those ‘investors’ were confused about what to do next.
Dumb money. Sports betting is down. People have time on their hands and liquidity is sloshing around. Don’t get carried away. We know over the long term the individual investor will underperform the broader market if left to their own devices. The big winners of the past few months will be giving up their gains in the next round of volatility. It’s fair to say markets got ahead of themselves in the recovery.
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 that they weren’t getting a good return. They were forgetting that 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.
A reminder to ignore the weathermen no matter what they forecast.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
With thanks to FYG Planners for this video