PERSONALISED INVESTMENT MANAGERS

COVID-19 Market Crash: Could we have predicted such a ‘Shocking’ Event?

03 April, 2020


          
            COVID-19 Market Crash: Could we have predicted such a ‘Shocking’ Event?

Uncertainty and change are the only things permanent and common to all of us in this world.

Accurate predictions could be seen as forecasts and this can be done only in more controlled conditions where many possibilities and probabilities are presented. But predicting such uncertain ‘shocks’ may be a challenge.

Some of the major earlier ‘shocking’ events that have occurred over the past few decades which have also impacted economies, the markets and our investments are the Harshad Mehta Scam of 1992, the 2000 Tech Bubble crash, 2008 Global market crash and meltdown and now Covid virus crash of 2020 and this 2020 sharp correction has happened in just 6 weeks over 7-10 trading sessions. Perhaps we need to brace ourselves for a new normal that such ‘shocks’ may happen to us every 8 – 10 years.

And with Covid 19, the magnitude of its impact globally, and the global lock-down and total closure of life as we know it is indeed something that we have never experienced before. Therefore, more than predicting such an event , the consequences and actions that the world and we have taken, and its impact on our personal lives and families is indeed most ‘shocking’ to all of us and possibly something we had never imagined would happen.

Warren Buffet’s famous quote on being able to predict shocks is note-noteworthy – “Since I know of no way to reliably predict market movements, I recommend that you purchase Berkshire shares only if you expect to hold them for at least five years. Those who seek short-term profits should look elsewhere.”

And his quote on ‘shocks’ and their impact on equities is equally note-worthy – “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

Will the stock markets recover and when? How will the lock down impact my job? Can I repay my loans? Can I afford fees for my kids Education abroad? What should I do now with my investments, especially in equity? These are areas some questions that surely have crossed our minds over the past few weeks.

An important question to also ask is… Had I done some planning with my money and investments over the past few years?

A well – defined customized Financial Plan, surely helps us all better in handling such destabilising events.

Let’s delve into more such questions in the coming article in this series.


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