The Imperfect Storm – The Average Joe

    The Imperfect Storm

    Victor Lei — Head of Research

    September 24, 2020

    September 24, 2020

    Don’t wake me up when September ends. The market volatility will be far from over — try December. The S&P 500 is down over 8% from their Sept. 2 peak and stock markets are whipsawing up and down. Sorry to break it to you, but this may only be the beginning.

    COVID + Trump + Tech Valuations + Election = The Imperfect Storm

    Stock prices are influenced by lots of factors… Economic data, global events, company announcements and thousands more that we couldn’t possibly list. Amongst these are a few major factors that influence the general direction of stock prices. Here are the factors you can thank for September’s wild price swings:

    • COVID fears… Lockdowns and fear of a second wave are holding economies back from recovering.
    • Trade wars… The US and China are going at each other in what seems like a never-ending trade war. China is the US’ third-largest trade partner and tariffs imposed by both sides will impact several industries that rely on exports.
    • Overpriced? Tech stocks have finally cooled off after a 5-month run that sent valuations to near-record highs Tech investors may be taking profits or diversifying into other sectors.
    • Election time… The November presidential election could decide the fate of the US economy over the next 4 years. Two candidates with highly opposing views could change the trajectory of different industries.

    How do you prepare yourself?

    Markets will look very differently in the beginning of 2021: A US president in place, potential vaccines and an economy likely in a better place. Until then, hold on for dear life, because you’re in for a bumpy ride. Investing isn’t a one size fits all solution but here’s how you can make the ride a little more enjoyable:

    • Take profits… If you’re heavily invested into risky assets or you can’t afford to lose a significant portion of your portfolio in the near-term, it might be time to sell.
    • Buy more… Investing for the long-term and not worried about short-term price changes? It might be a good time to take advantage of lower prices and load up on some of your favorite stocks.
    • Diversify… For those heavily invested in one sector, it might be time to broaden your horizon.
    • Do nothing…Try taking a long-term investment mentality. Buy and hold… for a very long time.

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