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Has COVID Changed Investment Strategies?

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Tuesday, June 8, 2021

The pandemic has affected many aspects of our lives.

The stock market saw its fair share of volatility and was certainly not immune to ups and downs as a result of the lockdowns and health scares.

So much so that academic papers have been written, inspecting the effect of COVID on stock market performance and the important implications for both financial theory and practice, covering the relationship between the pandemic and the instability of both stock return predictability and price volatility in the U.S over the same period.

A tumultuous year ended with U.S. stocks pushing to new record highs during the fourth quarter, riding hopes that coronavirus vaccines and an expected stimulus plan that would finally help the dust settle following months of economic and political uncertainty.

But in the final analysis of 2020, the Morningstar U.S. Market Index rose 14.2 percent in the fourth quarter, finishing 2020 with a 20.9 percent return. At year-end, the U.S. market index had rallied 70 percent from March lows, which had seen the index down almost 30 percent for the year. 

Not only that, but in the past year we’ve also seen some anomalies appear that no one could have predicted. Case in point is the Reddit influence on the massive uptick for AMC and Gamestop stocks, not to mention the more recent crash, and then impressive rally by DOGEcoin — both instances hanging on the words and tweets of Elon Musk. 

All of which is to say this: we live in a different age where one might be forgiven for thinking the rules of investing have undergone a fundamental shift. Well, the answer depends entirely on who you’re asking, and what their long-term financial goals are.

If you were to ask a young adult who is new to investing and was given a hot tip to invest in Cryptocurrency, they might be happily counting their profits without any thought given to retirement or their future. They might be laughing all the way to the bank today, and buying all kinds of new toys, but they most likely will have a vastly different point of view to that of a seasoned veteran with decades of experience in the stock market and investments.

Martin Walcoe of David Lerner Associates, for example, is a big advocate of what he calls "The sensible middle ground of investing”.  Walcoe says, “Get professional advice, and don’t take unnecessary risks with your money”. The middle ground is where you minimize risk, but maximize conservative returns.

If the rise and fall of stocks, fads and trends are hard to keep up with — the answer is not to give up on your long term goals. Keep focused on the prize of retirement. Set goals. Pay into your 401k and IRA the same way you would keep chipping away at your credit card debt.

Get yourself into the driver's seat.





Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associatesdoes not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.



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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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