Another Covid Crash – What Should You Do?
Simple answer: Keep Investing
There has recently been reporting of a new coronavirus variant named Omicron. Market reaction has been mixed to negative and the market has been choppy these recent weeks. With worries about whether this new variant could be the new dominant strain and if it could sent the world back into lockdown, what should you be doing with your portfolio?
First off, don’t worry about it too much if you are already diversified. This strain may hit certain sectors such as the travel and leisure industry harder than others. But, those industries will bounce back in time which was very evident in how quickly the market picked up after the downturn caused when covid originally was announced as a pandemic in spring of 2020.
Diversification is key during these uncertain times because it is difficult to foreshadow what companies and industries will adapt the best to changing conditions. We can always predict what might do better like work from home companies, but those companies can get overvalued quite quickly.
To show you why you should stay in a diversified in the market and hold (don’t sell), take a look at the chart below.
This chart of the S&P 500 shows the largest dip with the original announcement of the covid pandemic. Ever since, the market has had a remarkable comeback and with subsequent variants being announced, we do see some varying volatility. Even with the volatility, the market still comes back stronger.
Of course, there is always the possibility that another serious wave could impose full lockdowns on the world slowing economic growth and causing another deep correction similar to when covid was first announced, but historically, the market has always come back. So, continue investing and look at the downturns as potentially good entry points for more buying as the value levels return. From a technical standpoint, we are watching to make sure the S&P 500 holds above the 4550 level until the end of the year. That will be a key indicator in telling us whether we should just be holding or buying more from a technical standpoint.