Trying to time the stock market perfectly is something even the most experienced experts struggle with. While the general perception is political and economic uncertainty creates significant market volatility, that’s not always the case. Some stocks may experience volatility, but it takes much more than some uncertainty to create a long-term recession. Take the COVID-19 pandemic as a great example. Unemployment rates skyrocketed, and economies suffered globally due to shutdowns and fears of the unknown. But since the beginning of the pandemic, stocks have largely risen despite COVID-19 still being a factor. We’ve examined why.
Forward-Looking Markets Aid Recovery
The savviest investors look forward to what will likely happen in the future rather than focusing primarily on what is happening currently. Once it was evident the coronavirus was spreading worldwide and creating a global pandemic, some investors pulled their investments out of the stock market, while others bought into it at the same time. One of the reasons why investors have not panicked throughout the pandemic is because it will end eventually. Treatments or vaccinations will be developed to help infected patients recover, and life will get back to normal at some point. This forward-looking ideology is the foundation for stability in the stock market and can even make stocks rise during times of crisis.
What Experienced Investors Do During Market Volatility
Everyone reacts to market volatility differently. In most situations, though, staying the course and not making any significant decisions is the best thing to do during tumultuous times. When the coronavirus pandemic swept through the world earlier this year, the savviest investors did not panic. Some people may see this as a risk wealthy investors are willing to take since they have more funds and diversified portfolios, but the truth is governments have done their part globally to ensure an economic disaster doesn’t occur.
What Your Investment Plans Should Look Like
Predicting the stock market is impossible, even for the most seasoned experts who study it daily. While it’s always important to keep an eye open for great investment opportunities, one of the most effective investment strategies is staying the course and riding out market volatility. During the volatility and uncertainty created by the COVID-19 pandemic, no one truly knows what decisions to make. There’s still a large amount of uncertainty and fear of a second wave, but the argument is we are more prepared for it globally. The critical thing to remember is market volatility is normal, and there will be an end to the pandemic, we just don’t know when.
Stock Investing Info has followed the COVID-19 pandemic closely as it pertains to the stock market. While the markets look bleak temporarily, they have rebounded nicely over the last several months and even have reached record highs in some cases. It’s a classic example of you never know what to expect with stocks, so sometimes making quick decisions isn’t the right thing to do. If you have any questions or concerns about how COVID-19 may impact your investments in the future, contact us at any time.