To buy, or not to buy, that is the question…

My more astute readers may have noticed global stock markets rallying over the last three weeks from their recent coronavirus-related collapse. Those of you of a more cautious nature may be wondering what is causing this. My best guess is two-fold; first, the central bankers have announced hundreds of billions of dollars, euros and pounds worth of intervention in the markets, and secondly, investors are becoming slightly more confident with the coronavirus situation and are started to factor it into their forecasts.

It seems undeniable to say that the world cannot remain on lockdown forever more. The UK has ground to a halt; shops, restaurants and the vast majority of other businesses are closed and individuals confined to their homes (still voluntarily at this point). As a result, just about every company I can think of has no customers! They cannot get new materials. Payments are being withheld, new investments postponed. In short, it’s really not looking so rosy for the owners of those companies who are have shut down and mothballed enormous parts of their operations.

For those lucky few that have no debts and limited financial obligations, they can (in theory) ride the situation out reasonably well but for the rest (and I would suggest majority), this situation is an incredibly dangerous one. Who knows how many will default on their obligations, creating a chain effect of destroyed jobs and lost taxes.

Of course, this isn’t the whole picture – most western governments are ‘covering’ salaries to some extent, banks are giving mortgage and debt holidays, and costs are generally being reduced en masse to help businesses stay afloat. The question now is; how much longer will this situation go on for and what will happen ‘when it’s all over’?

The next six months

In my opinion, I cannot see the UK economy getting back to normal until the end of summer. Even when it does, it will be a slow and gradual recovery due to a collapse in public confidence. Who would really want to go out and risk death if they didn’t have to? The longer we remain in quarantine and the higher the death count gets, the more damage to confidence there will be. Likewise with conspicuous consumption; this situation has brought into stark relief the necessity of having money in your pocket and food in your cupboard; you can’t eat a pair of Nike trainers!

Likewise with companies; when will it be safe to restart dividends? Unfreeze hiring? To offer pay rises and promotions? What about investing a few million in new training and equipment? I can’t see businesses suddenly becoming desperate to start spending and investing again for a long time. Salaried employees will bear the brunt of this. I’ve said to many people, it’s better to have some money coming in than nothing at all, but it still doesn’t take the sting away for a generation watching house price skyrocket and pension benefits be slashed to ribbons.

Beyond 2020

These are only the short-term issues; what will happen to the UK beyond this year? Ultimately, I believe this situation is going to greatly increase our national deficit and debt. I don’t, however, think that this will be a permanent feature of national life as I believe the government will be forced into taking measures to regrow and rebuild the economy; taking a lead on investment and driving growth itself in the hope that the battered private sector will take heart and follow.

I am hopeful that this situation will convince the UK elite to ‘re-shore’ more of the UK economy; employ more UK labour, invest in UK products, keep more money in the UK and generally reverse the trend of the last 100 years whereby everything from food to basic labour seems to imported.

To buy, or not to buy, that is the question…

This brings me to the question in the headline of this article. Whether to buy more stocks or not. Ultimately, I believe the global economy will recover from this. It may take a few years, but it will recover. My immediate thought is that I have very little idea whether markets are going to go up, down or just sideways over the next 6-12 months. I suspect the recent rally will be short-lived and reverse but I simply have no way of really determining this; it’s all my ‘best guess’.

So what AM I doing right now? Well, firstly, I’ve not really sold much in the last two months. By the time the fall began in earnest, it already seemed like a bad idea to sell. My investment horizon isn’t six months; it’s six decades. Do I think the UK economy will still exist in six decades? Yes. Will all of the companies I’ve invested in survive that period; perhaps not, but I’m confident that the private sector will still exist and that I will still want to own a part of that.

Trying to ‘time’ the market is something I am determined not to try and do on a regular basis; I always want to be invested and I don’t want to keep ‘jumping in and out’ of the market based on whatever madcap situation is currently going on. But that doesn’t necessarily mean that I want to be adding new positions to the portfolio right now; I’ve moved close to pulling the trigger several times over the last few weeks and then stopped short. The answer for me, is an easy one; I don’t need to buy right now. If the market shoots up 25% in the next month then I’m already invested; I’ll miss out on buying ‘at the bottom’ but I also recognise that I likely can’t call the bottom and I won’t regret it. See one of my cardinal rules; don’t be greedy.

I’ve downgraded my earnings expectations for my investments as well as my expected level of dividends; I bought into the companies in my portfolio because  I trusted them to thrive and survive over time – not because I never expected them to ever go down or hit a bump in the road.

I’m also trying to use this time for positive things; reaching out to friends and colleagues who always seem to fall into the ‘wish I had more time category’. I’m trying to get back into my exercise regime; oddly, knowing that I don’t have a commute is making it harder to get out of bed and make time for exercise right now. I’m reading more and trying to take advantage of the extra time I have to research, observe and develop plans for what I want to do when we all get out of this colossal mess.

I’m trying to concentrate on positive, wholesome things in my life – of which I’m fortunate to have plenty – and am staying as far away from toxic, fear-mongering articles and media sources as I can. It’s always bemused me that some people seem to spend their entire lives spreading bitterness and hatred; at a time like this, I think it’s more important than ever that we pull together – not apart. It’s not always easy to do and at times, even I feel a bit overwhelmed by the sheer speed with which our entire lives seem to have shut down and been put on hold. But have faith that in time, this too will pass, and plan to make the most of that time when it comes.

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