Will the S&P/ASX 200 Index (ASX: XJO) act like 2008 or 2009? Or neither?
I think both years are very interesting to look at. The GFC started in late 2007 – that's when the share market started falling. But it took a while to get to the lowest point.
Is this like 2009?
The bottom of the entire GFC for the share market was March 2009. If you were an expert at timing the market, that would have been the best time to buy. But it's impossible to tell when we're at the bottom.
After March 2009 the share market, particularly the US share market, went on the amazing bull run we've seen over the past decade. Some investors seem to think that the coronavirus selloff reversal is going to continue like we saw after March 2009.
But don't forget 2008
But March 2008 is also interesting. The ASX 200 consistently dropped from December 2007 to mid-March 2008 and then went on a recovery of around 15% to the middle of May 2008. It was after that where the ASX 200 progressively fell until March 2009.
Think about ASX 200 value and earnings
Don't get me wrong. 2020 has got nothing to do with 2008 or 2009 in terms of how this will play out. It may not be like either year at all. The circumstances are completely different. We need to focus on today's thoughts on value and earnings trajectory. Are shares good value considering everything that's going on (but remembering the market has kept rising over the long-term)?
It's impossible to know what way share prices will go this year. Who would have seen the extent of the crash coming? And the recovery?
But unless you have a consistent investment plan into an exchange-traded fund (ETF), you have to make a choice about when and where to invest.
I think the ongoing US reporting season is giving an indication into the pain that the US may be about to go through. It's the big US financial shares that are reporting first and they are setting aside billions of dollars for losses. Hopefully they are setting aside too much.
This week and next week will give investors an insight into how the US is going. It will be particularly interesting to see how businesses like Alphabet, Visa and American Express report. If the numbers (and outlook comments) are worse than people are expecting then it could start share market pessimism again.
Time to invest in ASX 200 shares?
If I had a pile of cash to invest I think I'd wait a few weeks before investing it. Given the strength of the rebound of ASX 200, and the performance of individual shares like Afterpay Touch Group Ltd (ASX: APT) this month, I think it could be prudent to at least wait to see what happens with the US earnings season.
I have been investing during this period. I want to keep investing. And I see some great long-term opportunities at today's prices, but I also think it won't hurt by waiting.
