It never ceases to amaze me how quickly things can change. Sentiment can change overnight, and the Dow Jones Industrial Average falling sharply has caused many to sound the alarm bells.
If we put this into context, yesterday the Dow Jones erased two days’ worth of gains in one day. This is hardly cause for concern.
The S&P 500 also had its biggest one day drop since June. That’s three months ago. It’s almost as if people have forgotten what proper falls were like, when everything was in freefall back in March.
Pullbacks are a part of any market. Nothing goes up in a straight line. And as you should have either physical stop losses set, or alarms and mental stops in place to get out at certain point, you shouldn’t need to worry.
It is becoming clearer to me every week (to me, at least) that Covid-19 is not the killer pandemic that we originally all feared. Or if it is, then it is being significantly weakened by social distancing, masks, and a focus on hygiene and cleanliness.
It often surprises me how many men don’t wash their hands after visiting the bathroom in restaurants. This is disgusting, but I’d bet that many of those non-washers have become converts.
Whereas previously people completely disregarded the virus pre-lockdown, in the post-lockdown phase people, in general, are more careful.
What does this mean for the market? Well, Revolution Bars Group announced a Trading Update yesterday that Paul covered in the Small Cap Value Report.
I don’t believe that sales down by 22.5% in the last four weeks to 29 August 2020 is terrible. It’s certainly not great, but the base case expected was 55% of prior year sales with only marginal improvement in September and October. So long as a second wave doesn’t come and kill us all, I would expect things to gradually get back to normal. It’s hard to believe that we spent several months in lockdown, with no access to restaurants or anything but Tesco. And yet it was only six months ago. People have short memories.
I am long Revolution Bars (LON:RBG) from the placing but I am not tempted to add. Rather, I see the Trading Update as evidence that things will slowly but surely return to a sense of normality.…
