Stay the course: Stay in cash and do not buy any new stocks or funds at this time. If I don’t recommend you deploy capital then I can’t be accused of giving you overly risky or just plain bad advise. If you already have a dividend reinvestment portfolio then just hold it and let it buy up shares at cheaper prices. For those with a CEF income portfolio, just hold it (of course, any MLP funds are riskier during the oil price war). Income will continue and eventually your portfolio value (except maybe for MLP funds) will recover.
Expect the market to have short rallies like we just had and then another bounce off of a short-term bottom. Some bottoms may be lower than previous bottoms. Eventually, things will get better and that is exactly when market sentiment will hit the bottom along with the overall market.
Already, new Covid-19 cases in Italy have leveled off to a constant rate, as opposed to an increasing rate. In other words, the first derivative is now equal to zero, if the second derivative becomes negative then we will truly have a reason for better expectations regarding the course of this once in a century pandemic.
Interestingly, the event caused recession that was at first a negative supply-side shock has manifest an extreme negative demand-side shock to the macroeconomy. The strength of the demand-side shock is so strong it has created a bit of a temporary Phillip’s curve phenomena of increasing unemployment and decreasing inflation. This justifies the strong Monetary and Fiscal stimuluses that recently went into effect. Unfortunately, it is doubtful that unemployment rates will decrease and inflation increase as a result of the economic stimulus. Medical technology will advance, and along with containment of the virus’s spread, will eventually put an end to the problem. In the meantime, Good Investing is Not investing any cash reserves at all!
April 17 Update:
The S & P probably bottomed in late March. The recovery will be like slogging through a marsh or bog and will take a very, very long time to get anywhere. The stock market will get ahead of itself at times and have to pull back and re-adjust. Only buy small amounts of funds or stocks on pull backs and be prepared to a long, long slog. Growth stocks to consider are: FRTA, TAC, PRAA, and PHI. Divided growth stocks are: PHI, BG, RGP, ACO, DIN, and TIGO and the best ETFs are QQQ, and XNTK. The best opportunity out there at the moment is O at around $50.00. Really good income funds include SPHD, PEY, O, BBN, GBAB, FLC, FFC, EXD, ETJ, BDJ, CII, BST, RNP, and RQI. Allowing the funds and stock you buy to DRIP or re-invest their dividends will pay off the most in the long-run. Good investing!
