When the Unexpected Happens
• MARKET CRASHES are not unprecedented. What was unprecedented about the “pandemic plunge” was the reason behind it.
There’s no way to predict the entire impact of a pandemic on a global economy. COVID-19 hit us hard. With just about every nation in lockdown, and most people hunkered down at home, the concept of “business as usual” has changed indefinitely. This has taken a toll on everyone as well as on the stock markets.
Should we have seen it coming? We’ll leave that up to pundits. News of the coronavirus surfaced in January, but it wasn’t until it started spreading to Europe that the U.S. stock markets reacted. By the time the capital markets woke up to the reality of impending pandemic in late February, the black swan event was already under way—and most were unprepared.
You may not be able to predict when black swans will hit, but you can still be ready for them. What tests your mettle as a trader is how quickly you can pivot and respond to new market conditions when they, too, change quickly. Turn to “Black Swan Boot Camp” on page 20 to start your training.
Trading psychology guru and author Mark Douglas put it best when he said, “The best traders stay in the flow because they don’t try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment.”
Today is the moment to respond. Yesterday was about the pandemic. Tomorrow might be about the elections in November. Predicting which direction things will go isn’t the point. As traders, it doesn’t matter what is moving a market or where it’s going. Make yourself available to its potential opportunities. Easier said than done, I know. Perhaps we can help you get there.