Equity Markets: Selling out is the wrong thing to do at exactly the wrong time – JP Morgan

The recent US equity market drop and subsequent swings in prices have been dramatic. Investors may be tempted to sell out of equities and hide but that may, in fact, be exactly the wrong thing to do, at exactly the wrong time, in the opinion of Samantha Azzarello from JP Morgan Asset Management.

Key quotes

“This current bear market and recession are both very different from those in 2008: they are event-driven, not structural or cyclical. Moreover, recent buying and selling pressure has been amplified by systematic flows rather than massive shifts from retail investors.” 

“Historically, retail money leaving the market has signaled the bottom, suggesting that we may have more pain to feel in the equity market before we truly approach fair value. History also tells us that such large declines in markets can be followed by large, sustained bull markets.”

“Investors would do better not to succumb to some of the classic behavioral pitfalls that are so tempting in today’s turbulent market environment. The average investor doing the exact wrong thing at the exact wrong time, for what they think are the right reasons, ultimately hurts returns.”