21 October 2020
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Stocks slide under second-wave infection fears. Is this a crash or time to buy?

Peter Switzer
22 September 2020

Yep, the stock market is falling again. And the latest leg down for share prices is being driven by second-wave infections in the UK, Europe and the USA. There’s also a bit of buyer fatigue when it comes to famous tech stocks.

The question is: Are we looking at a potential crash again or is this a buying opportunity for anyone who wants to buy shares at bargain prices?

By the way, I don’t expect to see “bargain basement” prices coming (like we saw in late February to March 23) because the governments of the world and our own aren’t going to rush to close their economies down, but greater restrictions (possibly regional lockdowns and other barriers to business) are possible in coming weeks.

Also, the potential arrival of a vaccine over the next couple of months will work to keep positivity fighting the understandable pessimism that this damn virus brings. But still you should be expecting some stock market worries in coming weeks. In case you missed it, our stock market has been falling recently.

S&P/ASX 200 Index (One month)

Yep, the index that measures how our stocks are going, is down 5.5% since August 19, while the US-based S&P 500 Index is off a big 9.6%. It did roar ahead of our market because it has the hi-tech FAANG stocks, which have gone ballistic since the Coronavirus came to town. FAANG stands for Facebook, Apple, Amazon, Netflix and Google.

Happily, no one on my Switzer TV Investing programme is panicking about a looming big sell off. Instead they were pinpointing stocks that they want to continue holding or even want to add to their collection. You can see what stocks they think are hot and those they think are not at https://www.youtube.com/watch?v=uWjiMeFF3xs

For example, one expert, Jun Bei Liu of Tribecca Investment Partners, won’t even think about buying Telstra because it’s not a growth company. She thinks she can put her money to work better elsewhere.

She loves Tyro Payments, which went up yesterday by 0.83% while the overall market lost 0.71%. (That made me happy because I’m holding Tyro shares.)

On the other hand, Burman Invest’s Julia Lee thinks Telstra is a buy under $3 (which it is now) because she thinks it will do well when the iPhone 12 (with its 5G capability) comes later this year (maybe as early as October).

The infection news is going to spook the stock market for a few weeks, so we’re not in a “ready, steady, buy!” situation yet. However, once the vaccine news gets more believable, more positive and its arrival is more imminent, then stocks should surge higher again.

The stock market is also dealing with China trade tensions, European banks of dodgy behaviour involving possible money laundering, the US Congress fighting over and delaying another stimulus package, and then there’s the concern about a President Joe Biden, which looks highly likely, if the polls can be believed.

I believe a buying opportunity for some great stocks is out there waiting to happen. A number were named last night on my TV programme but I’m holding off for the moment.

Finally on the subject of the US election on November 3, CommSec analysis finds “…that share market corrections and recessions reduce the likelihood of an incumbent President winning a second term in the Oval Office.” Its team thinks “professional investors are buying protection for their portfolios against expected volatility as the equity risk premium builds ahead of the election – which is already the most expensive event risk on record.”

This is market lingo for taking out insurance for a stock market sell off linked to Joe Biden winning and Donald Trump losing. But some investors could be more nervous about Donald winning and Joe losing. Either way. the virus plus the election fears aren’t great for stock prices for the moment.

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