Free Falling: How Far Down Is Bottom?

I was born during the Eisenhower Era, when Castro was fighting Batista and Lucy was fighting Desi. Over the decades, I’ve seen my share of booms and busts, bulls and bears, melt-ups and meltdowns. I’ve lived as a working adult through the crashes of 1987, 2000, 2001, and 2008.

And I’m here to tell you, this month’s stock market volatility is the craziest I’ve ever seen in my lifetime as a journalist.

Maybe not quite the worst in terms of percentage losses, but certainly the most volatile, with the Dow Jones Industrial Average posting daily up-and-down swings of 1,000+ like a ping pong ball.

The following chart puts the Crash of 2020 into perspective. The market implosion of 30% we’ve endured over the past few weeks is certainly bad enough, but not yet as deep as the worst market crises of the 21st century.

The market always recovers from a crash, of course. This crash won’t be an exception. But it begs the question: should you start looking for bargains? A lot of inherently solid stocks with bright futures are now trading at ridiculously low prices. Problem is, the stock market might have a lot further to fall.

Two weeks ago, and again last week, I heard a few analysts and government officials cheerfully say on CNBC that the virus was contained in the U.S. and investors should buy beaten-down stocks with both hands.

One of your most powerful investment tools is the TV mute button. Only a fool tries to time a market bottom. Indeed, the 10-year Treasury yield has fallen back to 1%, signaling that the flight to safety continues.

I’m betting that the sell-offs aren’t behind us. The coronavirus pandemic is far from over and the damage to the economy from quarantines and business closings will start to show up in the economic data and corporate earnings.

However, if you wait until the bottom is obviously behind us, you might miss out on big gains. That’s where careful stock picking comes in handy, which is where the experts at Investing Daily can help.

One asset class with a history of weathering market downturns: dividend-paying utilities. These companies provide essential services (i.e., electricity) that people always need, even in a pandemic. Many utilities stocks now trade at deep values. For the cream-of-the-crop in the utilities sector, click here for our “dividend map.”

Baked into the cake…

I think it’s a foregone conclusion that the economy and employment will take major hits. It’s baked into the cake. When Wall Street starts to see those ugly numbers in economic reports, investors will get spooked all over again. Remember, we’re only a few weeks into the coronavirus pandemic and the full economic fallout remains to be seen.

To be sure, stocks mounted a (very) modest comeback yesterday, but it was one of their most volatile sessions in history, with wild swings across asset classes.

The major U.S. stock market indices all closed higher Thursday following a jittery session, as investors tried to gauge the efficacy of rescue packages announced by central banks and governments around the world. The Dow was up 188 points, or 1.0%; the S&P 500 rose 11, or 0.5%; and the tech-heavy NASDAQ gained 161, or 2.3%. Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE, where volume was extremely high yet again.

Authorities around the world yesterday put forth a flurry of monetary and fiscal measures to mitigate the economic damage from the virus. The European Central Bank (ECB) announced a $820 billion quantitative easing (QE) program; the Bank of England slashed its benchmark rate to 0.1% and announced a £200 billion QE program; and the Federal Reserve opened a new facility targeted at money markets.

Will these measures work? I doubt it. It’s called “pushing on a string.” Cheaper credit won’t help much, when supply chains are shattered, businesses are closed, and quarantined people are stuck at home and missing work.

And yet, over these cloudy skies, green shoots of optimism are sprouting. Walmart (NYSE: WMT) hit a new all-time high Thursday and several other consumer stocks soared as well. Tech stocks, services, and financials also showed strength.

Even energy stocks, which have gotten slaughtered in recent days, showed signs of life as top energy executives called for an embargo on Russian and Saudi Arabian crude oil, as punishment for the ruinous oil price war the two erstwhile allies have started.

As of this writing Friday morning, the major U.S. indices were trading higher, albeit in choppy trading. Optimists are nervous but they’re looking down the road, when the virus is behind us. They’re licking their chops at the fire-sale prices of great stocks. But stocks today are bouncing between green and red, struggling to gain traction. Bullish sentiment lacks conviction.

Maybe warmer weather will cause the virus to subside faster than thought. Maybe we’ll get a vaccine soon. Or maybe, just maybe, things will get worse.

This bear market will inevitably wane, but the question is when. We’ll get a better idea of the extent of coronavirus damage when first-quarter earnings come out.

Some industries, such as the airlines, will take many months to recover. But some, such as e-commerce, just might bounce back quickly. Walmart’s recent gains indicate that quarantined consumers will be ordering more goods online.

If you pick your spots now and you’re an aggressive investor, you might be able to scoop up a few once-in-a-lifetime bargains before the bottom is readily apparent. But you need to know where to look.

Look to gold…

Under these crisis conditions, one stand-out investment is gold, the classic safe haven during tumultuous times. Gold prices have been soaring. As coronavirus panic grips Wall Street, the yellow metal has further to run.

My colleague Dr. Stephen Leeb has pinpointed an under-the-radar play in gold that the rest of the herd is missing.

Dr. Leeb is chief investment strategist of the premium trading service, The Complete Investor. His play on the “Midas metal” could hand you exponential gains…if you act now. Click here for details.

John Persinos is the editorial director of Investing Daily. Questions about crisis investing? Drop him a line: