The coronavirus has caused the ASX share market, represented by the All Ordinaries (ASX:XAO), to fall another 3% in early trading at the open. Is this turning into a once-in-a-generation investment opportunity?
It certainly is giving us a much cheaper price to invest in shares right now. If you've been waiting for cheaper prices for a long time then now is your chance. Not sure you want to buy now? It's funny how our human nature of avoiding loss usually overrides the potential gains.
People are happy to buy shares when they're at a high price and going up, but not buy (and even selling) when prices are lower and going down.
How bad are things for the share market right now?
The All Ords is now back to around 6,500. The 7,000 level is quickly becoming a distant marker. It's erased the gains of the last six months and today is indeed the lowest point of the last half year. However, the index is still at a level that we saw briefly in mid-August 2019, so we haven't gone backwards that far (yet). And we're still 14.5% ahead of December 2018 levels.
Is it an opportunity?
It's definitely an opportunity to buy shares at a cheaper price compared to most of the past year.
Businesses like WiseTech Global Ltd (ASX: WTC), Webjet Limited (ASX: WEB), Altium Limited (ASX: ALU) and so on are the same that they were at the start of the month. Their share prices are now just a lot lower.
The question is, how much lower will it go? Let me just consult my crystal ball here…
"Try again later."
It's clear that the coronavirus is now spreading in multiple regions beyond China, and we're very likely to see the numbers grow in the coming days and perhaps weeks.
In my own personal opinion, I think there are two likely outcomes, either it will eventually settle down later on in 2020 (in a few months) like the lettered infections of SARS, MERS etc and then markets could quickly rebound. Or, additionally, but less likely, the infection causes shutdowns in other countries and it starts a recession because of lost earnings for businesses and disruptions to supply chains.
Whatever happens, I don't think it's going to cause another GFC. But I do think it's quite likely the share market will fall further if the US starts seeing unexplained cases appearing on the west coast or east coast.
On a ten year outlook, I think today's prices are attractive and it will become even better value if prices fall further.
Next week I will be putting some money to work. However, if I had a $1 million inheritance to invest I wouldn't do it all today, I'd spread that over the coming weeks (and months). The share market falls will not directly match the rise of cases, so there could be a point where the infections plateau at a fairly high rate but the market sees that as the time to start rising again – but who knows!
The point is that it's impossible to predict what the market will do, so I think it could be opportunistic to take advantage of these lower prices and steadily put money to work for the long-term.
