The world is currently faced with a double-edged financial dilemma. On one hand, the global COVID pandemic has caused problems for thousands of companies, led to high unemployment rates nearly everywhere, and has some nations’ currency values in a downward spin. The other part of the problem is an unusually volatile political climate in the U.S., just days before a presidential election. No matter how the election turns out, there’s a high probability that riots, violence, looting, and widespread political unrest will continue well into 2021.
What does all this mean for investors? Well, for those willing to take a risk on inherently unpredictable events, it spells opportunity. This is not to say that people who invest for a profit during bad times are vultures who are trying to make a profit on the misfortune of others. Quite the contrary, because there’s nothing wrong with attempting to maximize one’s financial standing in tough times. For some out of work adults, it makes perfect sense to purchase stock in companies that appear to do well in crises, like retail tool manufacturers, grocery outlets, and household goods makers. Plus, many people who are aiming to do well by putting their hard-earned money into corporate stocks and bonds are hoping to replace some of the money they’ve lost by being unemployed. Here is an overview of what to expect for the next year in terms of election results, the COVID pandemic, and other factors that are unique to the early part of this decade.
The Upcoming Year
After the U.S. presidential election is concluded in early November, look for global markets to shake off some of their major losses and rebound, no matter which party is victorious. That’s because the economy seems to love certainty, and once a winner is declared, there will be at least a modicum of it in the air. As for COVID, both the death rates and new case statistics are steadily declining and have been since mid-summer. If that trend continues, and if a viable vaccine becomes available, most of the world health entities will likely declare the crisis to be over. If that happens, and it’s a big “if,” then all the financial markets could rebound significantly.
Recently, market panics over the non-end of the COVID crisis and dashed hopes for a vaccine send financial markets tumbling. When one of the big drug manufacturers pulled its proposal for approval, not only did that company’s share price take a dive, but the entire medical sector suffered. Many investors are watching this segment of the economy closely in hopes of buying into a viable vaccine maker’s stock.
One of the most recent examples of a price rebound was also related to the medical field. Even after some pharmaceutical firms were negative about the idea of a COVID cure and their share prices tumbled, there was renewed interest in the long-term reality of finding such a cure. The investing public seemed to do a double-take and revisit the idea of putting their money into a cure, even it that cure is months away from hitting the market. Likewise, the price of gold recently rebounded from a short-term fall. Now at record highs, gold is one of the more reliable indicators of consumer attitudes. Apparently, when people become nervous about their financial security, they turn to the age-old metal as a safe haven. Gold is probably telling us that there is still a lot of uncertainty among diligent investors.
Short-Term Strategies for Turbulent Times
Short selling is a way to profit from falling share prices. It can be a smart short-term strategy in turbulent times. For example, if you believe company XYZ’s stock price is headed downward after a bad earnings report, you could short shares and turn a profit if the price indeed falls. Note that you’ll lose money if the price rises, against expectations. Many securities experience short-term dips in price, followed by short rises in price. If you believe you can time these dips, then it’s possible to buy at the low points and pocket the profit as values go up. It’s important to sell before the next dip takes place. To learn more on short-selling strategies, read online articles about the topic, and find out whether your brokerage platform allows naked shorting as well as covered versions of this potentially profitable strategy.
Long-Term Approaches for Crisis Situations
In a crisis like the recent pandemic, there are those who believe that everything will eventually return to normal, financial markets will become less volatile, and there will be a general increase in the value of the entire global stock market. For anyone in that camp, a long-term buy into something like an index fund could be a good strategy right now. A buy and hold philosophy, especially in the middle of a worldwide crisis, can yield excellent profits a year or two down the road.