Trading for the Second Wave Corona Outbreak

Europe seemed to think that the coronavirus was beginning to blow over. With cases rising at a decreased rate, the government slowly but surely began to let loose of the reins a little bit to regain a sense of normalcy. Boy were they wrong.

Their lax guidelines and restrictions only did one thing: cause the resurgence of the coronavirus in the EU. In the second week of October, it was reported that the average number of new cases that were recorded each day in the European Union and the UK combined was greater than in the US, which is a total reverse of earlier trends

Over the summer, analysts thought that the lockdown had significantly reduced the spread of the virus and they were right. However, as the government began to lift the lockdown, so did the cases quickly begin to spike. According to the European Union, the number of daily new cases across the EU and the UK combined for an 80,000 daily average.

On the flip side, I also think it becomes important to note that EU leaders have all agreed to raise 800 billion euros for recovery efforts considering this drastic upswing of corona cases.

Now, as traders and investors, what does this mean? Personally, I believe that this shows us 2 things.

1.) Diversify.

In the world of investing, all the numbers and graphs that we come up with ultimately don’t give us the most accurate prediction of the future. At the end of the day, numbers and graphs only serve to give us educated speculation.

A major takeaway from the whole pandemic is to ensure that you don’t keep all your eggs in one basket. It, therefore, becomes important to diversify as diversification serves as your very own insurance policy to market risk.

Now, diversification does not simply mean to invest and place your in money in different industries, it also means to place it in different markets and assets such as REITs, mutual funds, or even currencies. In doing so, you make sure your stocks aren’t directly correlated and that if one of the markets crash, then it won’t be as big of a hit on your portfolio.

2.) Nothing is a sure thing.

Investors had been positioning themselves to take advantage of Europe’s relative control of the virus in the spring and summer. As investors, ‘riding the hype’ is a common mistake that many of us make, regardless of the amount of experience you have.

Based on CNN Business and Moody Analytics, US recovery has plateaued since mid-September but even if it did report positive events, Europe serves as proof of how quickly things can go wrong.

As a tale of warning, then, let the European market serve as a reminder to practice caution when trading. Riding the hype train is never a good idea when trying to trade for a profit. The best course of action is to always trade based on research and prior strategy.