Stock markets suffered a sharp plunge into a bear market in March, taking share prices and valuations for numerous companies down to 10-year lows.
However, in the five months since, markets have rebounded somewhat.
The Straits Times Index (SGX: ^STI) touched a low of 2,233 back in late-March but has gone up around 13.5% since then.
In the US, the major indices have gone on to scale new all-time highs, even as job losses mount and the economy is poised for a deep recession.
The pandemic, in the meantime, has seen no signs of abating.
Apart from China, where some semblance of normalcy has been restored, many other developed countries are still grappling with community spread and the second wave of infections.
Should investors wait for another major plunge in stock markets?
Here are three reasons why I believe we will not revisit the lows witnessed in March.
The “shock” factor has passed
When news first broke of a possible pandemic, it stunned the world and left many in disbelief.
After all, the last major pandemic termed the “Spanish Flu”, occurred more than a century ago in 1918.
With rapid technological and medical advancements in both vaccines and antibiotics, it was inconceivable that such a large-scale pandemic could happen in today’s world.
However, as the virus spread like wildfire across countries, complacency turned to trepidation, and then outright terror.
Fear of the unknown and its associated dread led to a sharp sell down in markets as many panicked and assumed the worst.
Today, however, news of the pandemic is blasted almost daily on every major newspaper and website.
The idea of a pandemic has sunk into people’s psyche and no one is either alarmed or shocked anymore.
There has been a kind of stoic resilience built up around the world.
Unless something completely unexpected takes us by surprise once again, further bad news of a second or third wave is unlikely to trigger the same type of knee-jerk reaction that we witnessed back in March.
A deeper understanding of the coronavirus
As scientists around the world work feverishly on either a vaccine or a cure for the virus, our collective understanding of this plague has increased exponentially since March.
Back then, there were many unanswered questions on the mortality rate, incubation period and whether people could get re-infected by the virus.
Not having a clue as to the nature of the enemy we are dealing with triggered both fear and worry.
Dejected investors thus sold stocks as they assumed the worst would happen.
However, as more information trickled in on the coronavirus, countries are also better equipped to manage its spread and effects.
Strict lockdowns have been effective in controlling community spread, as shown by China.
There have also been new regulations enacted on the appropriate stay-home periods for quarantine.
Significant numbers of test kits, respirators and personal protective equipment have been manufactured to cope with the initial acute shortage.
This level of readiness puts peoples’ minds at ease and will not lead to the same level of anxiety seen back in March.
Adaptation and evolution
Finally, companies themselves are adapting to the situation and managing it better than they did back in March.
The hardest-hit industries have been forced to reinvent themselves and think of new ways to survive.
For instance, hotels are now offering staycation packages to make up for the lack of tourism.
Changi Airport Group, now facing a dearth of travellers, has recently launched its first online campaign featuring tax and duty-free products.
And the Singapore Tourism Board (STB) has launched a S$45 million domestic tourism campaign to encourage local tourism and prompt more people to open their wallets to support the ailing industry.
In short, the worst seems to have passed for many of these industries as they pivot towards a different business model.
Get Smart: Take the plunge
Rather than waiting for an event that may never take place, the suggestion is that you should deploy some of your idle cash now into attractive investment opportunities.
After all, as the saying goes, time and tide wait for no man.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
