The S&P/ASX 200 Index (ASX: XJO) is recording a small rally at the time of writing – a 0.69% gain to 5,279 points.
Since the ASX 200 reached a low of 4,403 points last month on 23 March, the market has rallied 19.89% going off of today's levels.
It's an extraordinary recovery – especially considering we still don't know the full extent of the damage that the coronavirus and the associated economic lockdown will have.
Because of this, many investors are getting nervous. Is the economic outlook for Australia and the global economy today compared to a month ago really worth a 20% rally?
One ASX fundie certainly doesn't think so.
According to reporting in the Australian Financial Review (AFR), fund manager Philip King of Regal Funds Management reckons we are in a "sucker's rally" right now.
"It's important to be patient and wait for the bull market," the AFR quotes King as stating. "There'll be a lot of false dawns. There'll be a lot of suckers' rallies, such as the one we're seeing now, but I think we just need to let time pass before this bear market is over," King added.
Is this ASX market a sucker's rally?
It's impossible to say for sure, but I do think Mr King has a point here. If you look at all prior bear markets the ASX 200 has endured, almost all were marked by 'relief rallies' after an initial plunge, only to be dragged down again by another plunge. This certainly happened during the GFC over an 18-month period – the market started crashing in November 2007 but didn't find its ultimate bottom until March 2009.
We are only 2 and a half months (not men) into this market crash today – food for thought. If we indeed saw the market bottom in March, it will have turned out to be the shortest bear market in ASX history.
How can you invest in a sucker's rally?
Even if this is indeed a "sucker's rally", your investing strategy shouldn't change in my view. Consistency of strategy is the key to successful investing, not worrying about 'finding the bottom' of a market crash.
If you find a business you really love and you're confident in it surviving and thriving during and after this coronavirus crisis, then you should buy it if the market's offering you a good price. If it falls even further, buy more or sit on your hands. A bargain doesn't change if the offer changes the next day!
Remember, even the best investors in the world almost never get the perfect price. Perfect can be the enemy of the good!
