The S&P 500 lost 11.5% last week, its worst weekly performance since the financial crisis, and closed in correction territory (a decline of 10% or greater). The selloff was triggered by fear and uncertainty about the spread of the Coronavirus and toll it could take on both human lives and the economy. Though the death toll from the virus has been minimal to date and the virus appears to reasonably contained, there is lingering fear due to the media/headlines and a known economic impact to supply chains (e.g. electronic components manufactured in Asia) and certain sectors (e.g. travel industry). In my opinion, the Coronavirus driven stock market selloff has provided an incredible opportunity to put some cash to work and buy beaten down stocks and ETFs.
If you’re like me, you have saved/raised some cash to capitalize on opportunities like this. It’s important to always have some cash reserves in your portfolio and I’ve shared some ideas on where to invest your cash for the highest and best yield in past posts. The volatility in the stock market and economic disruption from the Coronavirus over the next 3-6 months is very likely to force the hand of the Federal Reserve to lower interest rates to combat an economic slowdown.
The lowering of interest rates means lower yields on cash and cash equivalents making stocks, especially those of companies with strong balance sheets that pay a high dividend, much more attractive relative to cash. This past week I aggressively reallocated cash into stocks into the lows of the selloff and will continue to add in the next week(s) if the market decline continues.
What I Am Buying In My Taxable Accounts
Amazon (AMZN), Apple (AAPL), Google (GOOGL), Facebook (FB), Microsoft (MSFT), Twitter (TWTR), Pinterest (PINS), Canopy Growth Corporation (CGC)
Wells Fargo (WFC), 3M (MMM), Cisco (CSCO), AT&T (T), Pfizer (PFE), Qualcomm (QCOM), Viacom (VIAC), Macys (M), FedEx (FDX), Kohl’s (KSS), Medical Properties Trust, Inc. (MPW), Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C)
SPDR S&P 500 ETF Trust (SPY), Invesco QQQ Trust (QQQ), Vanguard High Dividend Yield Index Fund ETF Shares (VYM), Energy Select Sector SPDR Fund (XLE), iShares Preferred and Income Securities ETF (PFF)
What I’m Buying In My Retirement Accounts
This week I fully funded my Roth IRA (via backdoor) for 2020 at Vanguard. This move along with the cash allocation in my portfolios allowed me to actively average into index ETFs primarily focused on U.S stocks (e.g. Vanguard Total Stock Market Index Fund ETF Shares (VTI)) and international developed market stocks (e.g. Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA)). I also increased my 401k contribution percentage at Fidelity to take advantage of lower prices over the next few weeks.
I hope that you are taking advantage of the stock market selloff as well and putting some money to work. Whatever you do, try not to panic and sell from fear. This too shall pass and you will look back at this brief moment in time and remember it as time to buy, not a time to sell.
What are you buying? I’d love to hear your thoughts and ideas on how you’re capitalizing on the Coronavirus stock market selloff.