If September is the worst month for stock markets, October ranks as the second-worst historically. The S&P/TSX Composite Index had spectacular runs in July and August but lost steam in September. With many people warning of another market crash, the road could be rough, not only this month but for the rest of 2020.
The noise is thunderous, yet no one can give a timeline or say for sure when the crash will happen. However, several factors are converging that point to the direction of a nasty market correction. If you need your money in the near term, sell your stocks. You can still make gains and not sell at a loss later. Anything can happen.
Elevated volatility
“Get out of the kitchen if you can’t take the heat” is the best advice for now. For long-term investors, stay the course, but pay attention to your risk exposure. Balance your portfolio if you must in preparation for the crash. Don’t attempt to time market because you can’t.
The only sure thing is that volatility will remain elevated through year-end. Two factors are preventing a bull market. First is the ongoing battle with COVID-19. The pandemic won’t go away. Cases are on the rise, and economies could grind to a halt once more.
Second is the U.S. presidential election on November 3, 2020. The race for the highest office in America brings uncertainty. The election is pivotal, especially if a new administration wins. Like in the past, volatility trends higher as the voting day nears.
COVID-19 is the bigger concern
Between the pandemic and elections, the former is a more significant concern. While election results can impact the stock market, it’s not long term. If the vaccine doesn’t come soon and COVID-19 lingers, it will upset lives, jobs, and businesses. Countries might have to reset recovery plans and spend more on financial buffers or stimulus packages.
Long-term play
Market experts recommend holding stocks for the long term. If you own shares of stable companies and reliable dividend payers, you can ride out market downturns. You can still generate better long-term returns, despite the highs and lows during the period.
On the TSX, utility stock Fortis (TSX: FTS)(NYSE: FTS) is the asset you can hold through tough times and for decades. There are no wild price swings, while your dividend earnings keep flowing. Many stocks have fallen off on the cliff this year, but not Fortis. The year-to-date gain is 4.55%, and investors are content with the 3.71% dividend.
Fortis generates, transmits, and distributes electricity to retail customers in Canada, the U.S., and the Caribbean. The nature of the business is defensive, as 99% of revenues are regulated. The company commits to growing its renewable energy assets. Management has a promise to increase dividends by 6.5% through 2024.
Absorb the shock
The last quarter of 2020 is the time to play defence and not chase short-term gains. Your stock portfolio must be ready to absorb the shock if it comes today, tomorrow, or next week. Also, you can forget the noise if you’re happy to hold your core asset for years.
