Poof! There Goes all the Progress!

Market collapse creates unique opportunities when COVID-19 threat subsides


At the close of trading last week, the market with the Dow Jones Industrial Average standing at 19,800.

Last year’s remarkable advance for the stock market has essentially been wiped out in a matter of less than three months in 2020! Ouch! At times like these, it is easy to lose faith in the stock market. Most likely, you thought about selling some or all of your stocks. Perhaps you have already done so. It takes great courage and discipline to ignore all the noise of Armageddon, especially when our money is on the line.

I understand the temptation to believe in doom and gloom, as the coronavirus panic is real and painful. Fear is a remarkably powerful force that often drives us into irrational behavior. What is interesting is that our behavior does not seem irrational at the time; it only becomes irrational after the dust settles and we have time to look back on outcome of our decisions.

One thing is for certain is that the incredibility volatility and gut-wrenching decline will eventually stop. As I have preached probably too many times, there have always been and will continue to be booms and bust, but what we know from history is that we get through the busts and the market continues it journey higher while eventually establishing new highs. I suggest with steadfast conviction that this time is no different.

No matter how thin you slice it; there are always two sides. Stated perhaps more simply, every day, heavily credentialed experts are forecasting doom and gloom while at the same time equally accredited authorities are predicting a boom. I believe that we tend to see, hear and read what we are looking for. In other words, if we spend our days contemplating what is wrong, we will find problems and reasons to be concerned. On the other hand, if we look for what is good and hopeful, that is what we will find. In the end, we do not know anything more than what we are told. Therefore, we have to be careful what we read and listen too. For example, check on these recent conflicting headlines.

So, whom do we believe? Got me. It is really not important whom to believe because the short-term direction of the stock market is nothing more than a guessing game. However, the long-term trend is unquestionably up! Still, I understand why many folks believe that selling some or all stocks and going to cash makes sense given the uncertainty.

Then when the dust settles and things seem to be getting better, we get back in to the stock market at lower prices. Beyond what I just described is pure fantasy. Sadly, far too many investors do not understand or appreciate the stock market repeatedly hits a bottom well before the news turns good.

Nevertheless, the big apprehension about selling stocks and going to cash is that we have to be right, not once, but twice. First, our timing has to be correct when we sell. Secondly, we have to be right with when to get back in.

In my 35 years as a financial advisor, I am yet to witness anyone do this successfully. What I have learned is that many peeps get the first part right but repeatedly mess up the second because they wait for the perfect time to buy back in, which often comes after the market has far surpassed the level at which they initially sold.

Thus, they never pull the trigger and then miss out on the enormous future gains. Market timing is an un-winnable game over time and the financial graveyards are full of investors who learned this lesson the hard way.

As historian and philosopher George Santayana said, more or less, those who don't remember the past just get hammered again and again.

Please know that Casey Middleton and I stand ready and willing to talk with you via the phone or communicate by email, so please do not ever hesitate to reach out to us. We recognize the importance of staying in touch with you as we work our way out of this regrettable storm.

Harry Pappas Jr. is the Managing Director of Investments and a certified estate, trusts and divorce financial analyst for Pappas Wealth Management Group of Wells Far Advisors in Ponte Vedra Beach.


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