This week the banks were doing well. Bank stocks seemed to be defying gravity against the backdrop of retreating technology stocks, the lack-lustre REITs counters and, very prominently, the declining US market. The trio, namely DBS, OCBC and UOB pushed the STI to cross the psychological 3000 level. It’s certainly a sweet spot to be in for bank shareholders. The duo, DBS & OCBC, have reached the pre-Covid days, crossing their 52-weeks high level and, erasing all the losses that happened in between.
But things were certainly not like that one year ago. Just around the same time in early March 2020, the STI tanked more than 500 points in a week and continued to decline bit-by-bit in the days later. With the number of Covid cases increasing exponentially across the world and with no vaccine in sight, stocks, whether good ones or bad ones, were hammered really hard. Unless we are able to time it so well and gutsy enough to flush out all our holdings to sell into strength, it is almost a no-escape route for stockholders. Perhaps, many of us simply sat through the whole period. Of course, on hindsight, the overall drop was not exactly steep compared to several other major crises, but that was good enough to cause huge anxieties, especially when we had to contend with the daily bad news, the authority regulations and the stringent measures to stem the spread of the virus. Imagine, we were holding a relatively huge portfolio of stocks, it is especially daunting to see the value retreating every single day. Even though, the trio had their worst day very early during the pandemic, all aligned on 23rd March 2020, they continued to be in the doldrums for a large part of 2020. In fact, if we draw a 80% level based on the yesterday’s closing price on the respective price charts, it is found that their stock prices continued to stay below this level for most of the days in 2020. We have short memories, but if we put ourselves back in that period, it was like the world was coming to an end. It was only in early November that they started to spring into action convincingly.
Let’s face it. I believe many investors and traders were convinced that the market will return to its pre-Covid days once a vaccine is found, but the disturbing question is when? So long as the market was living in that uncertainty, stock prices would continue to be in the doldrums. For the seven months between end March and end October, the market was simply ‘not going anywhere’, retreating every two days for every advancing one and vice versa. Certainly, it would be senseless to put in big money to shore up our portfolio, unless we have a huge saving awaiting to plough big into the market. Furthermore, many market players have already been forced to dig deep into their pockets to support the fund raising activities made by several REITs and SIA. And all these happened in the backdrop of increasing unemployment and unprecedentedly huge recessionary pressure. But again, leaving our portfolio unattended was also not a good solution to welcome a market turnaround, which could happen anytime should a vaccine be discovered. Amid all these considerations, the best rational action was to buy in small quantities over a reasonable period of about 9 to 12 months.
So long as the market was living in that uncertainty, stock prices would continue to be in the doldrums.
That said, it had been quite an arduous task. Imagine just simply buying 100 shares of each of the banks per week would involve an outlay of $5,000 per week and would have easily cost us $125k over the next 6 months or so. Perhaps, this may not be a big sum for someone with say, $800k saving or who earns $30k a month, but it certainly meant a lot for many others. Furthermore, there were opportunistic purchases as well as ‘bailouts’ for other stocks as well. All these require some financial management and stock picking skills, and certainly the grit and conviction to stay on course.
Now with the stock market’s advance, vis-à-vis the banks, the pressure is now a lot less. Portfolio wise, it has achieved another milestone. But one cannot be too complacent at this time. The huge liquidity sloshing in the system that lifted the global stock markets to unprecedented heights could suddenly dry up. Or perhaps, the inflation could accelerate to such a level that it negates all our gains pushing us right into another crisis. The world is always evolving.
Lessons Learnt : Despite the adversities, continue the investing journey with grit and conviction.
Brennen has been investing in the stock market for 30 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is the instructor for two online courses on InvestingNote – Value Investing: The Essential Guide and Value Investing: The Ultimate Guide. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.