The Coronavirus outbreak has turned out to be more than just a Black Swan – it’s a totally random Black Piano from the sky that takes the Black Swan by complete surprise, landing on the poor bird. The global pandemic has penetrated nearly every element of society, totally upending healthcare, politics, business and education. What about investing?
For traders, investors, and financial advisors – the backdrop of Covid-19 has added new elements of investment and financial risk – nationwide shutdowns – that were previously under-appreciated or even ignored. No wonder massive intervention by the Federal Reserve were taken.
“The Fed acted proportionately to the crisis, ” stated Sylvia Jablonski at Direxion Investments in an appearance at ETFguide TV. Before the Fed stepped in, she adds, “Bond ETFs were trading at massive discounts.” The Fed began supporting financial markets via the direct purchase of bond ETFs, which is planned through at least September 2020.
From a tactical angle, Jablonski also explains how and when using leverage within an investment portfolio could make sense for long-term investors.
In retrospect, the age-old advice to the investing masses to just “do nothing” was never right. The first strike is that it incorrectly assumes the public are operating and investing with a perfectly suitable investment mix in their IRAs, 401(k) plans and elsewhere. Unfortunately, the latter is simply not the case.
Although ETFs tied to major equity yardsticks like the Total U.S. Market (SCHB), S&P 500 (IVV), and the Nasdaq-100 (QQQ) have made a sharp bounce (a relief rally) from their March lows, it’s been a highly concentrated rally. Regardless, there are plenty of things investors and traders can do right now to shore up their investments.
Among the checklist of things highlighted by Jablonski that investors should be doing are looking at defensive hedges, improving your own psychology and getting diversified. She adds, “You shouldn’t be so invested that you don’t have enough cash to live on.”
Watch the full episode of Coronavirus Investing: Stay Calm, Be Strategic and Plan Ahead