Cover story
4 / 5
Investors tempted into battered stocks and sectors need to tread
carefully, writes Anthony Luzio, as further falls are just as likely as a
quick rebound
Unexploded bombs
An oft-repeated piece of
investment advice is “the
time to buy is when there’s
blood in the streets”, a
quote originally attributed to Baron
Rothschild after he profited from the
panic that accompanied the Battle
of the Waterloo. More than 200
years later, it still holds strong, and
investors who took a deep breath and
bought into the MSCI World index
when it bottomed out in March would
have been handsomely rewarded,
with the index already up 30 per cent
from its lowest point. However, they
needed to be quick – unlike previous
crises such as the dotcom bubble,
when investing at the worst possible
moment meant you needed to wait
10 years to break even, in 2020 the
market has embarked on a round trip
encompassing a record high, one of
the biggest falls in the past 40 years,
then a bounce back to its starting
valuation in a little under six months.
Yet this has not been a uniform
recovery across all sectors and bargainhunting
investors who were too slow to
tap the rebound may be tempted into
areas of the market that were hit the
hardest by the economic lockdown.
The attraction of this type of
investing is clear, particularly for
those with a long-term horizon
that allows them to ride out any
volatility. If a stock falls 90 per cent,
In 2020 the market has
embarked on a round trip
encompassing a record
high, one of the biggest falls
in the past 40 years, then a
bounce back to its starting
valuation in a little under
six months
TRUSTNET