Today Alvar and Mathias talk about the situation in the markets, how you could deal with it and what we could do in times of corona 🦠 Virus.
We talk about
- The reason for the situation in the markets
- adjustments to ETF portfolios
- Stocks to pick and avoid
- How to deal with a potential upcoming recession
- Help your local community
As the economy will shrink this year because of corona markets are down significantly. Many companies can’t offer their services as supply chains are cut. Russia is targeting American energy companies that are highly dependent on new short term financing (high yield bonds) by reducing their oil prices. They will most likely have a hard time to get fresh money. The American household is also deep in debt and many companies are highly leveraged as loans are cheap because of Quantitative Easing.
For a recession, we need to
- protect our health
- Improve our skills, network to be in demand on the job markets
- Entrepreneurs will need to cut some costs and improve the products, processes and sales even more
- Invest to profit from lower prices
ETFs and stocks portfolios
For classic diversified ETF strategies, you can consider increasing your regular amount of savings over the next month to profit from the lower amount.
What we are doing
Alvar just bought flow trader, a brokerage company, to hedge his risk. The flow trader stock is behaving contra cyclical to the markets. Pricing increases the more uncertainty there is as more people trade and pay fees. He also keeps cash to buy a house so he sticks to his original plans.
Mathias is buying new stocks every week and is focusing on quality/value stocks that are affordable now and which services will be in demand in the next years like Apple, Microsoft, MTU,, Cisco wholesale, Visa. Mathias is also focusing stocks that potentially could be worth ten times in the next 5 years e.g. teladoc, the trade desk and mynaric. There are also growth stocks that profit from the situation like teladoc, Zoom, Activision Blizzard and iQiyi as many people stay at home.
Stay away from companies that have a high debt ratio or that have a lot of working capital in their supply chain.
“Brave” investors can also pick up quality companies that are oversold as their business is affected from corona and the price oil war e.G. Lufthansa, Shell, TUI, Carnival.
If you want to go the save route. Invest in companies that cover basic needs. Boring companies. Like American Tower, American Water works, Deutsche Wohnen. People will always clean drink water, want a flat in big cities and play cloud games via 5G.
Just an idea: You could also allocate some of your P2P consumer loan investments to stocks / ETFs in the next months if you’re in need of liquidity.
One last idea
As people will suffer from health issues and difficult job situation you should look for possibilities to help other people in need. Local communities should keep helping out each other to compensate missing help from authorities. So maybe you help some old people buying food, taking care of kids of other people or offer a diabetics patient some of your germicides. Every bit counts.
Let us know your ideas in the facebook group or in the blog comments below.
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