After experiencing a decade-long bull market in the US, stock markets emphatically crashed amid the global spread of COVID-19. In late February, we saw the largest one-week decline since the 2008 financial crisis. Markets continued to experience high volatility in March, with March 9 and March 12 being dubbed Black Monday I and Black Thursday, respectively, for colossal sell-offs across markets in Europe and the US. Less than a week later, the three big US indexes fell by over 12% when they reopened on March 16.
While markets are evidently making a slow recovery, the 2020 stock market crash is yet another reminder of the external forces that can have such a profound impact on your investment portfolio.
We called on savvy finance veterans based in Asia to provide sound strategies and advice for investors navigating this turbulent period in the global economy.
Max Greb, Portfolio Manager at Olivar & Greb Capital Management
During a pandemic, investing can be overwhelming and lead to emotional decisions. However, times of crisis often reveal some of the best opportunities to put excess cash to work.
What to Avoid: Don’t Buy Just Because It’s Cheap
In a recession, it can be tempting to pick stocks that suffer the most. Unfortunately, these are often companies at the greatest risk of bankruptcy.
In 2008’s financial crisis, these were the banking stocks, such as Bank of America (NYSE: BAC). BAC initially dropped 70% by October 2008, and many investors assumed the worst was over. Yet, after a short rebound, the stock fell another 90% only a few months later. It took a full five years for BAC to regain its footing, while many smaller banks went bankrupt.
In 2008 it was the banks. Today, it’s the B.E.A.C.H. stocks: booking, entertainment and live events, airlines, cruises and casinos and hotels and resorts – (and commercial real estate, too). Avoid these virus-sensitive stocks as long as virus-related uncertainty remains – even if they seem cheap.
What to Buy: Fundamentally Sound Companies
Pandemics often lead to indiscriminate selling. While lower quality stocks are down big, many high-quality stocks are down as well. This is where to focus. Here are two attributes of a high-quality pandemic stock:
Defensive: Companies that provide stable earnings, such as consumer staples (i.e. soap, laundry detergent, toilet paper), food and liquor (consumption even increased in 2008).
Strong balance sheets: Look for companies with high cash and low debt. As opposed to debt-laden airlines, consider airport operators that own real estate with significantly less overhead and debt on their books.
During a pandemic, buying at the very bottom is improbable. Instead, focus on developing a consistent allocation strategy – such as investing 10% of your cash every week for 10 weeks – and building a quality-focused portfolio.
To learn more about the services offered at Olivar & Greb Capital Management, add their Official WeChat Account (Olivar-Greb) or contact Max via email at max.greb@olivar-greb.com.
Ralph Woodcock, Senior Associate at Holborn Assets
Before making any decisions, it’s important to analyze the risks and rewards. For example, selling investments due to coronavirus fears may result in short-term losses and missed long-term gains.
Fortunately for investors, there are other asset classes that tend to either hold steady in a downturn or rise when markets suffer. While history can’t predict what will happen in the future, several assets have historically performed well in times of crisis. Having a well-constructed portfolio prepared for geographical and political risk in the current pandemic is now more important than ever. And as most retail investors don’t hold hedge fund–related strategies in their portfolios, we need to be creative with assets unaffected in a market downturn.
Property is an Investment
Property investors have depended on UK property for generations. Unlike other international property sectors, the UK has a clear and comprehensive legal system. British law is often regarded as the best in the world. Your investment success from real estate is determined by the supply and demand level. Right now, the UK is only building a fraction of the 300,000 new residential homes it needs each year. Holborn works with the most well-renowned developers in the UK, which means we offer an exclusive range of developments to suit all investment strategies.
Fixed Income
Fixed income generates a steady income stream in addition to the benefit of capital appreciation, fixed-income securities provide income generated from a portfolio’s balance. Bonds and preferred stocks pay a steady dividend and interest payments to investors, creating a consistent cash inflow. Fixed interest and dividend rates are set when the security is issued, and these payments are guaranteed if the issuing entity does not default. With personalized investment solutions to withstand volatility and address short-term financial needs, the long-term plan stays on track.
For more information about the services offered at Holborn Assets, feel free to contact Ralph via email at ralph.woodcock@holbornassets.com.
Mark Matlaszek, Director at Bluestar-AMG
How to Make Money During a Pandemic
The recent pandemic has brought the world to a close with record unemployment, stock market crashes and the closure of borders. This has had a huge impact on the global economy with some people even comparing it to the Great Depression. However, we live in a very different time, whereby governments can inject record-breaking amounts of stimulus into a failing economy to prevent it from collapsing. We also live in a world of technology, which is constantly advancing and developing.
So how do you make money right now? The key is to invest into quality companies that are run extremely well and hold decent cash reserves but also produce goods and services that everybody needs and wants during this time as well as normal times. An example would be streaming services such as Netflix and Disney+.
Technology companies (including biotech and science) have also been an excellent investment class over the last 10 years or so and will continue to be for the next 10 years.
Good quality companies that have been around for the last 50 to 100 years have seen every economic environment thinkable and make for a good choice investment as they will be the strongest to survive the current pandemic and will also make the biggest rebounds.
We do know that the world will heal, and life will return to some normality, but it will take time. As long as you take a long-term view, then investing into the global equity markets now offers a discounted opportunity that doesn’t come around often. There will be volatility ahead, but good quality blue-chip and technology companies will ease through the short-term volatility like they always have done.
To learn more about the services offered at Bluestar AMG, contact Mark via email at mark.matlaszek@bluestar-amg.com.
Michael Li, Guangzhou-Based Financial Advisor With Over 10 years of Experience
During the new coronavirus outbreak, investors quickly become more risk adverse and assets viewed as low-risk become a safe haven. In the commodities market, gold tends to be viewed more favorably while pharmaceutical and consumer-related stocks are also seen as sensible buys. For hedge funds, a market-neutral strategy is appropriate because it reduces market risk. At the same time, in terms of asset allocation, you can reduce the proportion of equity investment and increase fixed-income investment. The overall allocation should tend to be more risk-averse.
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