The stock market crash could become a great buying opportunity for long-term investors.
Things are likely to get worse before they get better, so it’s hard to time the bottom.
There are five key indicators investors can watch to determine when to buy the dip.
Warren Buffett said to be fearful when others are greedy and greedy when others are fearful, but after a week of losses on Wall Street, some say that advice doesn’t apply.
“Don’t catch a falling knife” was a more popular refrain this week as analysts questioned whether the stock market crash would persist longer than expected. With the Dow down 11% this week and the S&P 500 closing out the week 12% lower, it’s valid for investors to wonder if now is a great buying opportunity.
Even the most bullish outlooks suggest that things are likely to get worse before they get better. There’s no way to time the stock market’s ups and downs with certainty, but there are some indicators that investors can use to determine the bottom.
Here are five ways to tell if the stock market is about to recover.
1. Coronavirus Cases Dwindle
Perhaps the most telling sign that the stock market is ready for a turnaround is a peak in coronavirus cases outside of China. China battled a growing number of new cases for over a month, but when the number of new cases finally started to drop, the nation could start returning to normalcy.
Now that the virus has reached several continents, the number of new cases outside of China is the figure to watch. That’s the number one driver of a stock market recovery, outside of the creation of a vaccine. Fewer new cases mean containment efforts have been successful and the world will breathe a collective sigh of relief.
2. U.S. Coronavirus Cases Peak
If the coronavirus does become a widespread problem in the U.S., investors can bet on further stock market losses. Supply chain disruptions due to closed factories and limited travel have been the main cause for cautious guidance among U.S. firms thus far. But if coronavirus hits the U.S. hard, we’re likely to see even more pressure on stocks.