Doomsayers like Jim Cramer are begging ‘Robinhood Millionaires’ to realize their gains and pull out… is he right?
The Majority Of The Market Is Already In A Recession
While we’ve seen record numbers from the DOW we can pretty quickly see that the majority of the market has dipped since March, being propped up by a few star stocks.
As millions of Americans (and people across the world) struggle through the largest pandemic in a 100 years, the reports from the stock market have been inversely positive.
Americans now are feeling a bigger disconnect from their personal economy and the ‘economy’ as it relates to the market. But the reality is that the market has experienced the recession as much as anyone else in a majority of industries.
Is It Time To Panic?
Americans have lived with a sense of fear for the past six months and for good reason. A highly contagious virus that has claimed over 190,000 American lives is a good enough reason to lockdown and stay safe.
But like all natural disasters, this will end and we will rebuild. How long that rebuild takes and who will profit off of the rebuilding will be the bigger question.
For those of us who are not in dire financial straits, we must be empathetic to our neighbors who are inches away from collapse and support programs that extend their ability to carry on and survive physically and financially through this.
One of the reasons it took nearly a decade to exit the last recession was of how many people lost everything. The fewer people that lose everything, the quicker the turnaround. We hate to consider what would have happened if the CAIRES act was not passed and unemployment benefits, eviction halts and more were not put into place.
Panic, however, should be reserved for life and death situations and a calm, realistic and level head will allow you to weather any financial storm.
The Fed Has Extended A Lifeline
While the Fed can not help those who are already underwater, they can support the millions of Americans who are likely able to survive a short-term recession. Keeping interest rates low and injecting cash into the refinance and mortgage markets allow banks to continue to lend.
So, Should I Pull Out Of The Market?
This would be a personal risk assessment, but it’s probably a good time to think about investing as a 5-10 year plan and which companies are likely to survive and thrive in a recession / post-recession world.
Having a cash reserve to attempt to buy at the theoretical bottom is great as we do expect the housing market to slow as well.
Companies with a lot of cash reserves who are likely to overtake traditional brick and mortar like the Amazon’s and Google’s of the world could be in a great position. Major car manufacturers that are spending money on research and development and traditionally have government and fleet contracts could also be interesting.
Hospitality, travel, construction, and high-growth startups that are burning through cash are likely to consolidate or shutter if/when the recession extends.
What If I’m Planning To Retire Soon?
This may be the most difficult scenario. You’ve worked hard, made a plan, and we’re in a financial position to retire within the next couple of years. You don’t have time to ride out a recession and realize the gains on the other end.
Interest rates are too low to make any savings account or CD really worth it, but you don’t want to be stuck pulling out cash at the bottom of the market.
It may be the right time to pull out your cash.
Best to talk to your financial advisor who knows you and your finances better.
We are not financial advisors. The content of our emails and website are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!