The ( Covid-19) BEAR is Here ! Run , Hide , Escape or Get Caught !!

<image credit to focuspointtechnologies.com>

Nothing last forever, everything moves in a cycle like four seasons, we have a rough and roller coastal ride on our stocks market in the last two weeks.  World stocks market finally succumbed to this “deadly and widely spread Covid-19 “ pandemic and most of it enters bear market territory in just two weeks of continuous & severe plunging. The magnitude of the fall accelerated by the “tumbled “ of oil price due to OPEC’s failure to come to an agreement on supply cut, it doesn’t help during this low demand situation due to Covid-19 pandemic, a kind of double whammy impact.




The Dow plunged into a bear market in just 20 days — the fastest 20% drop in history<source: businessinsider.com>


DJ have experienced a thousand points dropped a few days in a week, a situation we hardly see after GFC. How long will this bear market last is anybody’s guess but one thing for sure is that the world economy will be badly affected due to border closure and travel restriction imposed by many countries? Many industries will also be affected by “standstill” of economic activities due to social distancing”.



Taking Stock ( Valuation Reset )







STI finally touched 5% below -1SD and only 7% away from -2SD ( a level during GFC ). In the past 33 years, STI only breach this level by 4 times, the other three were during 1987/88 ( Asian Financial Crisis ), 2003 ( SARs Pandemic right after Dot.com bubble), 2008/9 ( GFC- Subprime Crisis) and of course now the Covid-19 & Oil Crisis.

I plot the chart by using the lowest point reached on 13th March ( STI= 2510 ) when OCBC also reached as low as $8.71.

Buying at this level will give you a higher chance of wining the market in the long run, of course, low can be lower, there is a possibility that it may drop further to -2SD (STI = 2328) or drop by another -7%.

 As I blogged before, with the limited fund, we will need to deploy our war chest in-phase and buying in stages, in preparation for the worst-case scenario.

This might be just one of the few best time to buy stocks in our lifetime, but make sure that you are not buying with “leverage “ or money needed in the near future / short time.





Is important to buy good fundamental stocks that would survive during this crisis and have a diversified portfolio at this point of time.  Is also a good time to do some reshuffling of your portfolio by switching out the weaker ones to a stronger one, if deem appropriate and needed.


Final Thoughts


Different investors may have a different strategy on how to invest during this crisis time, base on their risk tolerance as well as their conviction about how the economic situation may turn out during this crisis. 

Some may choose to sell all their equity and stay sidelines to wait for better entry price, some may continue to hold and deploy part of their war chest bit by bit and some even holding cash since 2008/09 waiting for a better entry time.

No right or wrong, as long as one can money at the end the day.



Humans have been fighting deadly viruses throughout history, if you think we can find a cure and beat this Covid-19 eventually, this crisis can turn out to be an opportunity. What you need is a strategy and a plan in deploying your war-chest, choosing right (fundamentally strong) companies to invest, having a diversified portfolio.





Under current extreme “fear and volatile “ market, is easy to say “ stay calm and be strong “ but is also emotionally painful to see our portfolio value keep dropping, day by day.

Some choose to “close their book” and don’t want to look at their portfolio for time being, some decided to “chop finger” do not want to touch stock again after selling all their share with a huge loss.
For me, I choose to just stay the course, have “faith” with the market in the long run in believing that the market may recover and revert to mean eventually. Time being, I will just quietly hiding around the corner “ licking my wound” and counting my paper loss.

If you are among the few luckier or the best that picked the right stocks and still having +ve return on your portfolio. A very big congratulation to you!

For me, I am sitting with -20.41% ( -$593K ) on my YTD portfolio return vs STI of -18.27%.


My return is worse than STI because of my holding in the UK stock market where you will see that  FTSE-100 drops by more than -31% since the beginning of the year, also couple with more % of US Hospitality REITs in my portfolio.





Ok! Guess no choice, I would have to continue taking these “Big dividend Panadol” for the time being while waiting for the market to recover, provided that the “Panadol / Dividend “ doesn’t shrink as cash flow from most of the companies will be affected during this crisis time. For retiree that depend on dividend income to cover their monthly expenses, please do a stress test as the future dividend may be cut or reduced in current though economy situation, also even with active income, we will need to watch out for "lifestyle inflation" that may be difficult to adjust if we lose our job or active income, as we can see that many companies have announced pay-cut or some retrenchment recently.


Although is less meaningful to say it now, I still want to say “ stay calm and be strong”, most important is “stay healthy and sleep well” , do more exercise, drink more water and wash your hand regularly.



Cheers !!



STE



Regression Line For World Stock Market Indexes


















## S-REITs still not as cheap as during GFC in 2008/09.

Comments

  1. Hi STE,

    May I ask how do you get the graphs for the different indices/stocks and the SD?

    ReplyDelete
    Replies
    1. Hi CupcakedCrusader,
      I am using excel to plot these charts, if you want ,I can forward you the sample file.
      Please let me have your email id by just send a short message to this address : stesg50@gmail.com

      Cheers ! :D
      STE

      Delete
  2. Hi STE, your charts are very informative. We are likely to see STI at -2SD.

    ReplyDelete
    Replies
    1. Hi ThinkNotLeft,
      Yes, market still very volatile and more margin called and "shorting " expected..
      STI just need another -4% to reach -2SD. Is really scary in term of magnitude and speed of the drops but it all provide "opportunity" for investors who have cash / war chest to buy and have "holding power" to keep till market recover.
      Stay diversify and buy fundamentally strong companies is "Key".

      Cheers ! :D

      Delete
    2. On Stay diversify and buy fundamentally strong companies is "Key" -- Was wondering that given the market rout at this point, probably it is easier and safer to just buy market indices like STI ETF or World ETF (.e.g IWDA , VWRA).

      In the current situation, those weaker business have sufferred higher price drops and have lower weightage in index. Conversely, stronger businesses have lower price drops and higher weightage in index. So buying market index will over-weigh the stronger business.

      Nonetheless, the weaker business may have more profit potential if they survive. E.g. the airlines may rebound if the virus is no more and people begin to travel.

      Delete
    3. Hi TNL,

      Yes , indeed, buying ETF is one of the option to diversify and spread the risk.
      Cheers :D
      STE

      Delete

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