The world is changing faster today than at any time since World War II unleashed massive political, cultural and technological transformations. And it's leading many share investors to make some hasty, costly decisions.
Sure, there have been some other revolutionary developments since the 1940s.
Jetliners ushered in the era of international travel for work and play. The internet changed so many aspects of how we live our lives I won't begin to list them here. And the smartphone came around to enable everyone to carry the internet around with them in their pockets or purses.
These – and a number of other developments over the past 80 years – have seen the share prices of companies that weren't able to adapt plummet. On the flip side, companies with nimble management that got ahead of the curve saw their share prices soar.
We're seeing the same thing play out today, only much faster.
It took decades for the advent of affordable air travel to wholly disrupt the previous travel and leisure business models. It also took many years for the internet – which went live as the World Wide Web in 1991 – and smartphones to upend businesses that were slow to embrace the changes they unleashed.
The more gradual pace of those changes gave investors more time to position their shareholdings into businesses likely to prosper from the changing operating environment.
But society's transformational responses to the coronavirus pandemic – from governments to businesses to individuals – are happening in the virtual blink of an eye, prompting many investors to make hurried decisions.
Transformational changes in the blink of an eye
Who would have thought back on New Year's Day that 2020 would see international borders slammed shut and Australia's own state borders sealed and patrolled by the military?
Who would have imagined that Australia – and many developed nations around the world – would post record quarterly GDP declines. Or that millions of people would be working, shopping and socialising from home?
But perhaps the biggest change we've seen in the past 6 months is governments and central banks pulling out all the stops to keep their economies and share markets ticking along.
Official interest rates across developed nations are at or near record lows, while government stimulus packages are at record highs. That change transpired in a matter of months. But it's unlikely to wind back anytime soon.
Yesterday the Reserve Bank of Australia (RBA) deputy governor, Guy Debelle addressed the Australian Industry Group. He said it was "highly unlikely" the RBA would raise the official cash rate from the current record low 0.25% any time in the next 3 years.
With rates this low, Debelle echoed central bankers around the world in encouraging state and federal governments to take on even more debt to support the economy. He said:
The increase in debt is definitely manageable. Moreover, there is not, in my judgment, a trade-off between debt and supporting the Australian economy in the current circumstance…
This is particularly so with interest rates at their historically low levels, where the growth benefit from the fiscal stimulus will improve the debt dynamics and help service the debt in the future.
Fast moving share prices and ill-planned decisions
So many changes in so little time makes for an uncertain environment. And if you needed any proof that share markets hate little more than uncertainty, pull up a chart of the S&P/ASX 200 Index (ASX: XJO).
Everything looked to be going along nicely until 20 February, with the ASX 200 up 7% for the year. Then panic set in, and the index plunged 37% by 23 March. At which point government and central bank stimulus came pouring in, and the ASX 200 rocketed 35% higher by 10 June.
These are the sharpest corrections and recoveries ever for the top 200 Australian shares.
And the rapid pace of change has led many investors to make costly mistakes.
Like ignoring companies with long-term share price growth potential for the latest hot tips on social media. Those hot tips might keep heading higher after you buy shares. But you could well find yourself buying near the highs and then opting to cut your losses and sell near the lows.
Which leads us to another often costly mistake investors make when share prices move so quickly. Trying to time the market becomes much more tempting when even 'boring' blue chips see their share prices tumble 37% only to rocket 35% or more higher in just a few months.
But calling the highs or lows in the markets is like trying to forecast the black or red on the next roulette spin. There are too many variables at work to do this with any consistency.
Two shares embracing the rapid COVID changes
We'll round this off with 2 quality shares with long-term share price growth potential.
First is US-listed, Walmart Inc (NYSE: WMT).
Walmart has been quick to increase its online presence as many shoppers chose or were forced to stay home. And yesterday (overnight Aussie time) Walmart upped its game with a novel drone delivery program.
As Boston 25 News reports:
Walmart Inc. is taking to the skies to expand COVID-19 testing. The retail behemoth launched drone delivery of self-collection kits on Tuesday to single-family homes within a 1-mile radius of the North Las Vegas Walmart location… The pilot program will be expanded to Cheektowaga, New York, in early October.
It's just a pilot program, mind you. But this is a good indicator of a blue chip share getting ahead of the rapid pace of pandemic driven change.
Walmart's share price is up 16% year-to-date and down 6% from its 2 September all-time highs.
On the ASX 200, few shares have been as well-positioned or quick to respond as online retailer Kogan.com Ltd (ASX: KGN).
Year-to-date Kogan's share price is up 176%, giving it a market cap of $2.2 billion. Kogan's share price is down 10% from its August 18 record highs.
