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Market Crash 2.0: Brace for Impact

Volatile market, stock volatility
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For months, many of my fellow Fools and I have warned investors to be ready for another inevitable market crash. After an extremely volatile March, the market has had a rapid rally since, with several TSX stocks now at record highs.

The problem with this rapid recovery is that while stocks have rallied, the economy has suffered. Many industries remain impacted by coronavirus, which has led to an extremely high unemployment rate.

Furthermore, a lot of problems that have been created by this pandemic have only been temporarily fixed by massive spending from the federal government.

The reality is that there is still so much uncertainty that you would expect most stocks to be trading at a discount to their pre-pandemic prices. In reality, though, many stocks have nearly recovered fully, and numerous others have reached new highs.

This has left the market highly vulnerable to another selloff, which is why the heightened volatility over the last few days is not at all surprising.

What to do in a market crash

If this crash continues to get worse, what you don’t do is just as important as what you do.

You must stay disciplined and leave your emotions out of it. Without discipline, you risk making major mistakes such as panic selling some of your top stocks, which could end up setting your portfolio back for years.

Instead, make sure that each and every holding you have is a high-quality business that you’re committed to owning for years. If they aren’t, you should consider getting rid of them as soon as possible.

If they are high-quality and you are committed to them, then you should have no problem holding them through a selloff, and you may even consider buying more.

Furthermore, you may also be watching other TSX stocks you don’t own. It’s crucial you have a watch list ahead of time and a fair price you’re willing to buy these target stocks at.

That way, when volatility is at its highest, you can ignore the noise and stick to the fundamental long-term decisions you’re happy with.

TSX stock to buy in a market crash

One stock you may want to consider buying shares of as it continues to get cheap is Alimentation Couche-Tard (TSX:ATD.B)

Alimentation Couche-Tard is one of the top stocks on the TSX. Because of this, it almost always trades at a premium. That’s why a market crash the perfect opportunity to gain some exposure.

The company owns thousands of convenience stores and gas stations around the world. These are usually highly defensive businesses, but in the odd year that’s 2020, they were impacted quite significantly due to shutdowns from the pandemic.

Despite that, Couche-Tard has managed to put up impressive numbers in its recent earnings report. Besides that, the company is so strong and well positioned financially that it’s actually looking at taking advantage of any potential acquisition opportunities.

That long-term view by management is exactly why the company has had so much success and why it’s one of the top growth stocks on the TSX.

In the last market crash, the stock fell by roughly 25%. If that were to happen again and the stock got anywhere below $35, I would definitely consider adding some shares.

Bottom line

Market crashes are unavoidable and a part of investing. Most investors view them as something you want to try and avoid. However, they are great opportunities if you can use them to your advantage.

So, make sure you are prepared and have a plan for yourself. You’ll be kicking yourself if you don’t.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.

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