There are many lessons to be learned from the pandemic. Life is short. Getting outside is good for you. Rethink your work-family balance. And more.
Here are a few investing lessons:
#1 - Since markets move quickly, investment decisions should not be guided by gut reactions and news headlines.
In February of 2020 when the global and local impact of COVID was increasing the S&P 500 fell from 3,386 to 2,237. That’s more than a 1,000 point descent in about a month (2/19/20 to 3/23/20). Nearly a third of value—gone. Fast and furious.
Five months later it had recovered. The rise was not as sudden as its fall, but still stunning considering all that was going on in world and our nation in those months.
Do not expect the market to correlate with what you are seeing, thinking, or feeling in the moment. Few people can time the market. Most likely you can’t either. Be a consistent investor not a market timer.
#2 The impact of technology increased market returns and benefitted the economy.
This chart shows the return of companies in the technology sector (via Vanguard Information Technology ETF as a proxy) since January 2020 before COVID was on most people’s radar.
Notice how it dipped along with everything else at the onset of the pandemic, but from late March 2020 on it shot up nearly 60% from where it was at the beginning of 2020 before COVID-19 began.
Marc Andreessen, a venture capitalist, noted several benefits of technology during the pandemic in a recent article:
The prospect of a second Great Depression was very real, as reflected in the stock market collapse of early 2020. But then, a miracle happened — a technological miracle. Much of the economy kept operating, and in fact many parts of the economy started operating even better under lockdown than before. The primary credit for this goes to the American worker, but almost as much credit is due to the technology that made this miracle possible.
The most positively shocking development was that virtually all knowledge work in the economy simply kept going. Of course, companies were forced to shut down physical production facilities such as car factories, and frontline workers bore the brunt of in person exposure to COVID throughout the pandemic. But consider this: Not a single significant company engaged in service provision — whether banking, insurance, communications, media, healthcare, you name it — had any downtime at all. Every knowledge worker went home, fired up their laptops, jumped on Slack and Zoom and Gmail and Github, and kept on going. I must have talked to a hundred CEOs through that initial period, and they were uniformly shocked at how well remote work worked, right from the start.1
Full disclosure: Andreessen is biased as a tech entrepreneur and his case throughout the article is overstated and can be debated, but his point is taken. While there has been economic carnage among many small businesses due to pandemic restrictions and various technologies have exacerbated societal problems, the positive contribution of disruptive technology in our economy and day-to-day lives is also obvious in our lives and portfolios.
Every life challenge can make us better or worse. Let’s learn from this significant moment in our history.
1. "Technology Saves the World". Accessed online: https://future.a16z.com/technology-saves-the-world/