Have you given any thought to what you're going to do the next time the share market falls?
I'm not necessarily talking about the 37% plunge the All Ordinaries Index (ASX: XAO) suffered in February and March during the COVID-19 panic selling.
But US share markets are now back at or near record highs. And the All Ords has soared 37% from its 23 March lows, bringing it to less than 14% off its all-time highs. With that kind of historic share price growth in mind, it's well worth considering your plan for any potential share price retracement.
And panic selling shouldn't be on the agenda.
Let's see what the smart money has to say.
What the experts are saying about share prices in 2020
Here are 4 market experts' opinions, as quoted by Bloomberg:
Randy Frederick is the vice president of trading and derivatives at Charles Schwab & Co. He said, "I can't see what's going to change people's perspective on why we should stop buying. If we continue to buy and we have a few more pullbacks, which I think is likely, people will just continue to jump in and buy those dips."
Brian Belski is the chief investment strategist at BMO Capital Markets. In a note he wrote, "US stocks have exhibited an epic price recovery that not only is unprecedented but tests most major academic and common-sense assumptions." On Friday he restored his forecast of approximately 4% further gains for the S&P 500 by year's end.
Shawn Snyder is the head of investment strategy at Citi Personal Wealth Management. He said, "When investors believe that (the Fed will intervene), it gives them excess confidence and they're willing to take on more risk and buy stocks even though valuations are high. There are several bears that have thrown in the towel."
Victoria Fernandez is the chief market strategist for Crossmark Global Investments. Bloomberg notes that she wouldn't be surprised to see a share market pullback sometime in 2020, but citing low interest rates she still expects the market to trend higher. "You've got these really low rates. That's going to help drive the market."
Foolish takeaway
Consensus opinion, and I'll throw my hat in that ring, foresees some pullbacks ahead. But the same voices also see share markets trending higher, at least for the rest of the year.
That means you may want to consider any pullbacks as buying opportunities. And keep some powder dry — aka cash on hand — to take advantage of those bargains when they come along.
That doesn't mean investing in any old shares that are losing value. What it means is looking for shares that are down during market pullbacks, which have good opportunities for strong share price rebounds.
I'll leave you with 2 widely different examples.
First, blue-chip share Sydney Airport Holdings Pty Ltd (ASX: SYD).
Sydney Airport's share price fell 48% from the implosion in air travel caused by the coronavirus. The Sydney Airport share price is up 25% from its March lows, but still down 32% year-to-date. If your investing horizon spans at least 2 years, Sydney Airport shares could well look like a bargain at today's prices once people begin flying again (which they will).
If Sydney Airport's share price falls during a wider market pullback, it could prove a great buying opportunity, in my view.
Second, growth stock Afterpay Ltd (ASX: APT).
Afterpay's share price also got hammered by the virus, losing 78% from mid-February through March. But thanks to a 927% share price surge (yes, you read that correctly) from its 23 March lows, Afterpay has delivered its shareholders a gain of 199% so far in 2020.
If the Afterpay share price takes another tumble during any market retracement, this is one dip you may want to buy into.
