Bleach, Pepto-Bismol, Prozac, wine, and Enrico Caruso records – these are the assets that you might want to accumulate in the coronacrisis market that has wiped out trillions of dollars. Not even the Federal Reserve launching quantitative easing infinity could rescue equities, and the jury’s out about Washington’s $2 trillion pork-filled stimulus package being a cure or a nostrum. Are you in the mood for the heart-stopping adventure of swimming in the ocean of red ink? Well, today’s stock market is probably the best action you can get since everything else is closed.
Here Today, Here Tomorrow
If you took a bite out of the FAANGs (Facebook FB, Amazon AMZN, Apple AAPL, Netflix NFLX, and Alphabet GOOGL) a few years ago, or you put the pedal to the metal on Tesla before its ascent to the heavens, you may have been patting yourself on the back before Black Monday 2020. But you were really tested during the trilogy of dark market days. Did you hit the sell button a bit too prematurely, or were you weathering the storm? Many do not take into consideration throughout the panic selling that nearly all these companies listed on the Dow Jones Industrial Average or in the S&P 500 will exist tomorrow. Of course, it is hard to think of the next five years as you witness your net worth crumble hour by hour and your judgment is clouded by the fourth glass of bourbon.
If you sat on the sidelines awaiting an opportunity, now might be the time to cash in on your discount and take advantage of the savings. Disney, for instance, has plummeted 35% year-to-date. Starbucks has slipped about 30%. McDonald’s has dropped 22%.
While the U.S. economy is dynamic, most of the brands you love today will be here tomorrow. Walmart, Amazon, Dunkin’ – you can anticipate operations will remain open for the foreseeable future. It is the pump-and-dump, flash-in-the-pan stocks that plunged in the infancy stages of the market rout that can break your portfolio.
Gimme Shelter
Want to seek shelter until the volatility subsides? Think about conventional safe-haven assets that have allowed millions of investors to hide in the bunker until the hurricane passes, the fires die down, and the space alien invasion recedes. Sorry, scratch that last one – too many Paul Krugman interviews!
Gold and silver have indeed taken a beating throughout the coronapocalypse, but that is because traders needed to liquidate to cover their margin calls or buy other stocks. In recent sessions, gold and silver have recovered in significant ways, thanks to a monumental monetary expansion by the Federal Reserve that will inevitably trigger a tsunami of price inflation.
The U.S. dollar continues to be the premier currency in global financial markets. The greenback recently enjoyed its best week since the 2008 economic collapse as everyone pours into the buck. The index, which measures the dollar against a basket of currencies, has surged 6% YTD. It has pulled back since the central bank’s unprecedented response to the crash, but where else would investors feed their currency appetites? The euro? Good luck. The Swiss franc? Policymakers are fighting against appreciation. The loonie? Canada is a lost cause. It is hard to find any remotely stable currency.
Young investors would suggest cryptocurrencies as the new safe haven. Bitcoin has fallen 6% in 2020, but its monthly performance has mirrored that of gold: liquidation and rebound. Investors sold their bitcoin positions, and now the digital currency is surging.
OK Doomer
If you believe the market has yet to bottom out, you can put on a pair of shorts to make money from the widespread misery. Options may be a bit too advanced for the common investor, but you can always grab some shares of exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that short the market. Many popular vehicles have returned enormous gains.
The ProShares UltraPro Short QQQ ETF (SQQQ) trades inverse to the Nasdaq Composite Index. It is incredibly volatile, though there is potential for modest gains if you time the market correctly. If you understand the science behind this tactic, let us know! If you purchased even a couple of shares of VelocityShares Daily 2x VIX Short-Term ETN (TVIX) stock before the market crash, you would have made a killing. It may be too late to hop in as it peaked at $1,000 before cratering below $250. The iPath Series B S&P 500 VIX Short (VXX) stock surged to as high as $79, but optimism wiped out about half of its gains.
Is the U.S. economy doomed for the next several months? If that is your conviction, you might be able to get these ETFs and ETNs at a steep discount.
Keep Calm and Go Long
Will the situation get better or worse? Until a vaccine is developed, will we be forced to live with COVID-19 as we enjoy barbecues and ball games in the summer? Is it best to live in permanent lockdown? Nobody has the answers, and anyone who claims to is a charlatan. In the end, the best strategy might be to wait out everything. Buy a few stocks you have had an eye on for a long time, take out a month’s worth of cash, stay indoors, and catch up on episodes of Peter Gunn and The Donna Reed Show streaming on Amazon Prime.
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Read more from Andrew Moran.
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