With Stocks Down from Coronavirus, is Now a Good Time to Invest?
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With Stocks Down from Coronavirus, is Now a Good Time to Invest?

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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The impact of the coronavirus has extended beyond health, slamming economies around the globe. Stock market crashes in recent past — either due to financial recessions or viral epidemics — have largely survived to eventually see gains. As financial markets continue to crash from the coronavirus, many are wondering — is now a good time to invest?


Is It a Good Time to Buy Stocks?

With the coronavirus exploding in China and spreading to other parts of the globe, many wondered if a significant impact would reach the US stock market. Well, all wondering is over at this point.

The US stock market is crashing. Yesterday, Wall Street experienced its worst day since 1987.

Earlier this week, so many investors tried to sell and avoid further losses that $7.6 billion trading platform Robinhood was down. The company said it suffered technical difficulties and couldn’t handle the surge in activity.

While the markets are down, investors are now wondering what to do. Is it a good time to buy stocks? Should I invest in the stock market?

Should I Buy Stocks with the Ongoing Coronavirus?

In November of 2008 — in the midst of the US financial crisis — Rahm Emanuel was serving as a member of Congress. Emanuel (D) represented the 5th District out of Illinois.

In late 2008, Emanuel was credited with saying the following:

“You never want a serious crisis to go to waste.”

Here’s what he meant: Crises are often times unchartered territory. They’re situations we’ve yet to encounter, as people, a society, or economic systems. For politicians — those in charge of powerful policy — crises present opportunities. Crises enable policy makers to do what they couldn’t have done previously.

You’re probably not a policy maker. Yet that doesn’t mean Emanuel’s message has no application in light of the ongoing coronavirus and its economic impact thus far.

It’s definitely a different perspective on the coronavirus situation. Naturally, we first and foremost want to help the situation as much as we can. But if we apply Emanuel’s message to the current stock market from the perspective of an investor, most would agree the message would be to invest.

Should You Invest in the Stock Market?

Here’s what we know: the markets are down, significantly. This is in the anticipation of an economic meltdown as the coronavirus continues to spread. In the US, confirmed cases are still relatively low, but most anticipate considerable spikes in the coming weeks. While Italy is on the verge of a financial bailout, fears in the US linger over a potential recession.

Here’s what we believe: over time, the coronavirus situation will improve. Granted, in certain parts of the world, it will undoubtedly get worse before it gets better. Yet already in China — where the outbreak began — numbers of new cases are dropping. Business is starting to return to normal. All of apple’s 42 stores in China, for example, reopened today.

If we look back at how previous epidemics have impacted the stock market, we see positive signs. From the HIV/AIDS epidemic in the early 1980s, to Zika in 2016 — the markets always recovered.

The markets also recovered after the 2008 recession. In February of 2009, the S&P 500 held nearly 50% of its value in May of 2008. Yet throughout the subsequent five years, the index steadily grew 153%.

A ten-year chart of the S&P 500, from 2008 to 2018.
A ten-year chart of the S&P 500, from 2008 to 2018.

Of course, it is entirely unknown if the same activity will apply to our developing situation with the coronavirus. We’re absolutely in the midst of a pandemic.

And while things are bad, we simply don’t know how much worse they’ll get. But if we remember the words of Emanuel, we could be in the midst of an opportunity.

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

What do you think of the ongoing impact of the coronavirus on the stock market? Is now a good time to invest? We want to know what you think in the comments section below.


Image courtesy of Hawaii Public Radio.

March 14, 2020

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Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).