Where are the buying opportunities amid the COVID-19 crisis?

Initial Expectations

Around the time COVID-19 cases began appearing in Japan and the virus was spreading globally

it seemed that many individual investors and analysts on social media were characterizing the impact as “limited.”

Fewer deaths than from the flu

Fewer deaths than from the flu

More people die from eating mochi every year

"It’ll subside once a cure is developed"

It wasn’t like this during the Lehman crisis

Many full-time investors shared this view as well

Although I was only investing small amounts at age 24, based on my experience with the Lehman Shock, I felt this wasn’t severe enough to surpass it

Also, based on the lessons learned from the Lehman Shock, there might be a trend where investors—who can hold onto stocks for the long term even if they incur losses—start propping up value stocks, much like Buffett does

I thought that if that happened, it would be difficult for the crisis to surpass the Lehman Shock

The moment I felt it would surpass the Lehman crisis

However, the moment I felt absolutely certain it would surpass the Lehman Shock was Prime Minister Abe’s first emergency press conference (February 27).

The sudden school closures

What this signaled was the government’s sense of urgency—that things had reached a point where drastic measures were necessary. (Though I think at that time, the greater concern was whether the Olympics could even be held.)

And when it became clear that schools would be closed, the first thing that came to mind was:

“Who’s going to take care of the kids?”

That was the first thing that came to mind

If parents had to take time off work to care for their children at home, the economic damage across various sectors would have been easy to foresee.

I believed production and logistics, in particular, would be affected early on, and I expected that on the day the announcement was made, non-perishable food items and daily necessities would sell out—even if only temporarily.

And once people started stoking the flames, panic buying ensued.

As expected, various items were sold out within two or three days.

The fact that parents are taking time off work means that a contraction in economic activity and a decline in income are likely to become apparent in the future.

However, even at this point, as far as I could tell, the majority of opinions on social media and analysts’ views were that the impact would be “limited.”

That said, there were also some tweets that shared similar concerns about the future.

In fact, on the day after the announcement, the Nikkei 225

closed at 21,436 yen

21,142 yen—a drop of only 806 yen

Personally, I still sensed lingering traces of a bull market.

Those were days when I truly realized that people’s mindsets are slow to shift

Ten days later (March 9), the Nikkei Average

partly due to the sharp drop in crude oil prices,

fell below the 20,000-yen mark at the close

Eighteen days after Prime Minister Abe’s emergency press conference (March 19), the Nikkei 225 closed at

16,552 yen.

It feels like it was around this point that the market finally began to price in the economic impact of COVID-19

Future Outlook

Here is how I see the trend unfolding

I sensed this trend when Prime Minister Abe held his first press conference

Although the government is preparing countermeasures, I personally fear that their impact may be limited

While people are buying stocks during the market crash to secure a future for themselves and their families, the number of people losing their jobs or accumulating debt is rising—so this is certainly not a situation to celebrate unreservedly

Therefore, I hope the government will get serious and roll out effective countermeasures

Until recently, things had been unfolding as expected, but now an unexpected situation has suddenly arisen

Tokyo lockdown

.

I’d heard on the news about travel bans in Europe and city lockdowns in China,

“I thought, ‘Other countries will probably take a hard line, but Japan can’t do that, right?’”

That’s what I thought.

I guess I was a bit naive. (Laughs)

At Governor Koike’s emergency press conference on March 23, she even mentioned the possibility of a city-wide lockdown.

At Prime Minister Abe’s emergency press conference on March 28, he said that while a state of emergency wouldn’t be declared just yet,

“We’re holding on by a thread,”

Taking all of the above into account,

With daily confirmed cases in Tokyo exceeding 60

and cluster infections within facilities in Chiba

and cases of people testing positive after returning to their hometowns from Tokyo

Given this situation,

a city-wide lockdown seems increasingly likely

I think

If the capital, Tokyo, were to be locked down, the damage would be far more severe than anticipated.

And this trend isn’t limited to Japan—it’s happening all over the world

Given that the U.S.—and specifically New York—is currently the country with the highest number of infections,

I believe economic damage exceeding that of the Lehman Shock will become increasingly apparent in the future

Personally, I’d be happy if this prediction turned out to be wrong.

The best time to buy right now is around summer.

So, that’s a period you might consider as a potential target for future stock purchases.

Right now, it seems that various factors—including investor anxiety, market interventions by various countries, and the consideration and implementation of support measures—are causing stock prices to fluctuate wildly.

Stock prices are currently being driven by investor sentiment rather than economic indicators (my personal opinion).

Well, even if economic indicators are released, they likely just reflect conditions from when things were operating normally

and are likely to be vastly out of step with current social conditions

I expect that around June through August—when companies release their quarterly earnings reports and, as their financial strength is eroded, announce dividends, shareholder benefits, and future strategies—stock prices will begin to reflect the real economy.

However, according to an NHK report on March 19, the Tokyo Stock Exchange has introduced special measures allowing companies to proceed without audits from accounting firms during this COVID-19 shock,

and if things go badly,

we could see a storm of cooked books.

Furthermore,

it has been decided to implement a special measure extending the delisting rule for companies that have fallen into negative equity due to deteriorating performance—from the current one-year grace period to two years.

At this point, it’s hard to know what criteria to use when investing in stocks (-_-;) lol

You could end up buying stocks from companies that are effectively bankrupt

So you really need to be very careful

Personally, during this period, I’m considering buying large-cap stocks in sectors with low cyclicality, as well as

or making additional purchases of U.S. stock ETFs from Vanguard, such as VOO, VTI, and VYM

This is just my personal view at the moment, and I expect the timing and specific stocks to change from time to time

Reflections on the COVID-19 Shock

As I mentioned at the beginning, what struck me most strongly during this COVID-19 shock was

that even full-time investors and analysts can misjudge

The market moves in ways that the vast majority did not anticipate

People’s mindsets are slow to change

.

Considering how difficult it is even for professional investors to make accurate predictions,

I feel there’s a danger in buying stocks based solely on the opinions of influential people on social media

Even for beginner investors, while there may be people they look to for guidance,

I believe it’s important for them to select stocks by combining that person’s predictions and thoughts with their own.

Even if a prediction turns out to be wrong, others won’t take responsibility.

I hope you’ll lead a life of investing without regrets♪

I’d like to express my deepest condolences to the many people around the world who have been infected and have lost loved ones during this COVID-19 crisis.

I believe more people will face difficult circumstances going forward, so I hope that number will decrease, even if only slightly.

Thank you for watching until the end.