The S&P 500 Index peaked on February 19, 2020 at 3386. The US market really started to decline after February 24.  On March 20, the S&P 500 Index closed at 2304 for a decrease of 31.95% from the peak and a decrease of 28.66% for the year.

COVID-19

In March 2020, the impact of the Corona virus really started to impact the United States. By the first and second week of March, companies started to close or have people working from home.  Bars and restaurants closed.  The borders closed.

For current statistics, look at https://www.coronaviruslivedata.com.

The Economy

No one likes to say the R word but there will undoubtedly be a recession in 2020.  The actions of the federal government to support businesses and lower the Federal Reserve rate to zero is a reaction to the severity of the downturn caused by closed businesses and people not working.  Many think we will all be back to work by first of April, but I would think it would be until at least May before things start to look normal again.  This will coincide with a decline in new cases and lower death rates.  A COVID-19 vaccine will probably not arrive until 2021.

The sudden stop of the economy will take a while to unwind.  Some companies will go out of business.  People will be reluctant to travel or be in crowded malls and restaurants.  It might not be until 2021 before we start feeling normal again.

What Should You Do?

The first thing to do is to reduce your spending.  Do not buy discretionary items.  If you still have a job and income, save as much as you can.  If you don’t have an emergency fund, now is the time to build one.  If you have excess savings, now is the time to purchase cheap but good stocks.

Reduce Your Spending

Since you don’t know how long this virus will last, you should not be buying or paying for something you don’t absolutely need.  The sad part about this is it will hurt the economy even more.  Less discretionary spends means fewer jobs.  But you need to survive first and spend later.

The Emergency Fund

If you don’t have an emergency fund and you still have a job or income, save as much as you can.  Ideally 3-6 months of income.  The more, the better.  If you are nearing retirement, you really should have one year of savings in a liquid account.  Not stocks or an investment that could decline in value.

Time to Buy Stocks

For those of you who have extra cash, this is the time to buy stocks.  When there is blood in the streets.  Some companies are cheap, especially oil stocks, BDCs, and REITs.  You might want to wait to see if oil stocks, BDCs, and REITs are going to survive before jumping back in.  The mortgage REITs are under extreme pressure due to the type of debt they hold.  Many banks are calling in their loans which caused them to sell their investments.

Instead look at consumer staples and technology stocks that have held their value during the downturn.  I would recommend you create an account of Yahoo Finance or Seeking Alpha, and then create an account and a portfolio as a way to track stocks.  Both sites has mobile applications and will notify you of news on a particular stock you are following.

Some stocks have actually gone up.  ZM (Zoom) has gone up a lot in 2020.  These are the kind of companies that will gain revenue during a health crisis like this because people are working from home.  Look at the YTD performance column in the image below of some stocks I am following on Seeking Alpha.  The date for this image is March 29, 2020.