Target Great Stocks At Bargain Prices In The Next Downturn

This crazy pandemic market and economy is unprecedented. While the stock market has had a huge recovery from the lows, there is a good chance of another downward move. In the calm of a monthlong rally, it’s a great time to target great stocks at bargain prices.

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Expect Another Downturn

While the economy and market will ultimately recover from this crisis, there could be more trouble ahead. You might get another bite at the apple to buy great stocks at bargain prices ahead of the eventual recovery.

Here’s the situation.

The market has grappled with pandemics in the past but never to anywhere near this degree in the modern era. There have certainly been economic downturns before. In fact, there have been 11 prior recessions in the post-World War II era. But we have never seen such a sudden and comprehensive economic crash like this.

Several reputable firms and analysts are calling for a 30% or 40% economic contraction in the second quarter. Let’s compare that to the contraction during the financial crisis, the worst recession since the Great Depression. In the worst quarter, the fourth quarter of 2008, GDP contracted 8.4%.

Of course, this recession is self imposed to avoid the spread of the virus. The economy didn’t roll over on its own. Government restrictions crashed the economy. The easing of those draconian measures can revive it.

It’s like an athlete that’s injured. Sure, his combine numbers will fall off a cliff while his leg is hurt, but he will be right back in business when the injury heals. It will just take some time.

The market is sensing that the economy will restart sooner rather than later. As a result, the S&P 500 has rallied 30% from the lows in March. The index has recouped about 60% of the losses at the low and is now just 14% off the February 19 high.

I’m a believer in this country and this economy. We will overcome this virus and this recession. The economy will come back strong and so will the market. That said, there is a strong chance that the market has gotten ahead of itself in the near term.

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