“Why not get out now and wait?!?”
In one way, people and the stock market are very similar: both hate uncertainty. With markets plummeting, and the threat of pandemic looming, uncertainty seems to be everywhere.
The urge for self protection is strong. The urge to liquidate investments to preserve value–even if at a much lower value–can be strong.
I’ve lived through numerous market panics, big and small, over my 25+ years in the business. Early in my career, I worked as a trader for Charles Schwab. This was 1995, and long before the era of internet stock trading. When Schwab customers needed to place a trade, they would call a Schwab broker like me.
As a stock trader at Schwab, it was uncanny to me how the do-it-yourself Schwab customers would always predict the bottoms of these panics. When call volumes spiked dramatically, and every call was a worried investor selling everything, then you knew you had reached the bottom.
Who knows. Maybe even greater panic lies ahead, but panic is definitely in the air now. And in my experience, following the herd in panic is never a good strategy.
The stock market is now completely at the mercy of coronavirus news. If the news continues to get worse, the market may follow the news lower. However, when the news cycle turns, and we better understand the scope and consequence of this virus, the market is sure respond favorably. And, it will happen quickly.
The speed of the potential market snap back is why it is usually not a good idea to sell out of stocks and wait. An investor can end up waiting in cash as the market rockets higher.