Worried investors should avoid making big moves because of coronavirus fears

Personal Finance

Foreign travelers wearing masks walk past a departures information board at Beijing International Airport in Beijing, China as the country is hit by an outbreak of the new coronavirus, February 1, 2020.

Jason Lee | Reuters

When the market makes big moves, you might be tempted to make big decisions. However, having a one-size-fits-all approach to your investments will likely lead to regrets.

“One of the big mistakes I see people make is that they think that investing is an all or nothing game,” said JJ Kinahan, chief market strategist at TD Ameritrade.

On Friday, stocks fell sharply as fears about the coronavirus’ impact on China and other markets spread. The Dow Jones Industrial Average shed more than 600 points, or 2.1%. The S&P 500 saw a 1.8% drop.

Though stocks are poised to rebound Monday, investors may still be on guard. Kinahan said they would be wise to take a cue from professional investors.

“Most professionals very much think of it as a partial game,” Kinahan said.

That means if you had a good 2019, you may take a small percentage – 10% or less – off the table and realize a profit.

“You should not, in my opinion, not be thinking all or none with your investments in any situation,” Kinahan said. “You should be thinking partials.”

Removing some risk can give you some comfort and help you think straight, he said.

That advice will likely be relevant in the coming months as the presidential election and coronavirus outbreak continue to make headlines.

Positive and negative news about the candidates could lead to more intraday volatility, Kinahan said.

Meanwhile, the health outbreak could have financial consequences for companies, he said.

For example, McDonald’s is closing hundreds of its restaurants in China in response to the crisis. Because 10% of the company’s revenues are from China, that could affect their future financial performance, Kinahan said.

Wary of the coronavirus, crowds of people wear surgical masks. In light of a deadly virus outbreak in China, Hong Kong citizens wore surgical masks in fear of contracting the flu.

Willie Siau | Getty Images

One analyst is predicting the coronavirus could hurt both supply and demand for Apple products. The company’s stock has dropped from its highs on worries about the spread of the virus.

“This has the opportunity to affect earnings,” Kinahan said of the longer-term implications.

In a note to investors released on Monday, Mark Haefele, chief investment officer at UBS Global Wealth Management, said the “short term-growth and earnings impact from the coronavirus may prove to be significant, but it will also likely prove temporary.”

A sharp recovery could be spurred by pent-up demand, Haefele said. In the meantime, UBS recommends limiting exposure to companies with exposure to Chinese tourism and instead focusing on safer areas like dividend-paying stocks.

Investors may also want to take a cue from Apple CEO Tim Cook, who has taken a wait-and-see approach to the virus outbreak, Kinahan said.

“Have a plan in case things start to get a little bit worse of where you want to go next or if you want to go to cash,” Kinahan said. “But in the meantime, wait and see what happens.”

More from Personal Finance:
The Fed holds rates steady. Here’s why that matters to you
What investors should avoid doing as the market swings
The retirement savings blind spot you don’t realize you have

Leave a Reply

Your email address will not be published. Required fields are marked *