Is now a good time to invest?
The current business environment seems to be in flux. There are concerns over the new coronavirus, and the oil market has crashed largely because of a price war between Saudi Arabia and Russia in what was already a period of relatively weak demand. As a result, many stocks have been hit. As of mid-March 2020, the market stood firmly in bear territory, bringing an end to a bull market that began in the aftermath of the Great Recession.
There is no doubt that the spread of the coronavirus has caused a major reaction on Wall Street. Fewer people are out and about. This means that sales will be slower at many companies that rely on consumer spending. Restaurants, museums and other businesses that cater to the public may have to lay people off as states and localities encourage people to avoid crowds as much as possible. This could lead to lower demand for many goods. This fear has led the market lower.
Stocks To Look For
On the other hand, it might be useful to look at stocks to buy in industries that might do well during the public health crisis. Companies that produce medical equipment might be posed to outperform the market at present. If the coronavirus becomes a major issue that lasts for months, there will be a high demand for medical equipment and supplies. Some pharmaceutical companies might do well as they look to produce treatments that could alleviate the effects of the new COVID-19 virus. Those working on a vaccine that could prevent infection from the disease altogether could provide major returns.
Not all stocks that will do well are tied to the medical industry. Consumer staple goods will likely continue to sell large quantities of their products. Few people have been able to avoid memes tied to toilet paper outages in major supermarkets. Procter & Gamble produces some of the major household items that have sold out. They will need to produce more toilet paper to support the demand. Companies like Coca-Cola and Pepsi will continue to produce their sugary drinks and bottled water offerings. Retailers like Walmart, Kroger and Target will continue to sell food. Even in Italy, a nation that’s all but shut down all public places, consumers are still allowed to go to supermarkets and pharmacies. While there will be a slowdown in many industries, producers of consumer staples and those that sell them should continue to operate in the coming months.
Major oil companies have dropped rapidly in recent days. It’s not likely that companies such as Exxon-Mobil or Royal Dutch Shell will go out of business. Therefore, the current drop could provide a great buying opportunity. These stocks may go down more in the short run, but they should last for decades into the future. Additionally, companies that pay a dividend to their investors will provide an incentive to hold them as interest rates in bonds drop. In recent recessions, companies that pay dividends have tended to drop less than companies that did not pay them.
Is It A Good Time To Invest?
The answer to whether it’s a good time to invest depends upon where you currently are in life. If you’re relatively young and have decades left, pretty much any time is a good time to invest. There will be plenty of time to recover any paper losses. Those who have 401(k) plans should continue contributions. If you’re nearing retirement and want to have a couple of years of cash available, you might want to hold onto any that you’ve accumulated. You might miss out on some gains, but you might also have to sell at a lower price if you need to access the cash. If the current disruptions are relatively short, the market could recover relatively quickly. Should the disruptions last longer, the market could go down more, and the recovery could take longer.
It is impossible to know what the stock market will do on a day-to-day basis. However, those who continue to invest money in quality stocks that pay out dividends should be able to continue building wealth over time.