Whilst everyone is focused on the fall lets focus on the bounce. In the GFC the market fell 54% and took 12 years to recover its high.
The bank sector fell 56%, and including dividends, recovered its high in less than three years, went up 115% in just over a year and blew through the all-time high in five years.
This is a chart of the Bank sector accumulation index showing the fall and rise in the GFC. On the basis that we are going to forget COVID-19 within a year and the market drop is going to turn into a “Pop”, we are going to see this opportunity again, not just in banks, but in many stocks and the market.
As an illustration of how a stock that falls 50% has to rise 100% to recover, the following tables show you not only how far the markets, sectors and stocks have fallen (as of Midday Friday March 13th 2020), but, these tables show you how far each market, sector and stock would have to rise in order to recover its one month high.
With Tom Hanks infected, the Grand Prix cancelled, Italy shut, Europe cut off from the US and some Sydney firms closing their offices you might think we are at the point of peak negative news flow, but only so far. It can get more negative yet. Wait until Trump gets it and you are stuck at home with your children for a month (God Forbid!).
Technically it is also wrong to buy until some upside momentum appears. So we're still sitting on our hands. For now. But it’s a view that is subject to change at any moment.
A WATCHLIST OF STOCKS TO BUY COME THE RECOVERY
We have tentatively put a list together of stocks that we liked before the sell-off that we would like to buy again (XRO an obvious pick - can't see their earnings being affected at all) and others.
Some are stocks that have been hit hard and should/could be bought for the bounce (but maybe not for the portfolio long term), others are growth stocks that have been hammered, others are just some quality industrials.
Red shows how big the fall has been so far (as of Friday 13 March midday), and blue shows how far it would need to bounce to regain its previous high.
World Markets:
Australian markets and sectors:
TOP 50 STOCKS
NEXT 50 STOCKS
Worst stocks in the ALL ORDINARIES INDEX
Read more from Marcus
Marcus Padley is the author of the Marcus Today stock market newsletter. To sign up for a 14-day free trial please click here.
michael magill
You go over the wall first Marcus and i will follow you mate.
Marcus Padley
A noble sentiment Michael....but don't let me hold you back...if you want to lead us out, I'll happily hand you the flag! :-)
Nick Taylor
You are the GOAT Marcus
Theo Griepink
Marcus, you're an absolute and very generous gem!
Nathan Thomas
I think one comment missing from the article is that the valuations were getting to nose bleed levels for some stocks and it would be foolish to think they will bounce back to those levels.
James Light
This is the most useful post on here for the last 2 weeks. No clickbait title, no amateur medical analysis. Spot on Marcus
Shaun Perovic
Good morning Marcus I’ve found this article so useful and great to do my own research. Im just a construction worker with a sore back that doesn’t know where and how to find this information updated. Marcus are you able to find the updated versions of this information? Or where I can get it myself? Thank a lot Shaun