The Dow plunged nearly 1,000 points this morning, making today's 3% loss the worst day for stocks in 2020. That could just be a small hiccup in the longest-running bull market of all time, but many fear it could be the start of the next stock market crash...
While we can't predict the future, we do know now isn't the time to panic. And if you're worried about what the coronavirus means for your money, you're in the right place.
Knowledge is power, and we're going to show you exactly why stocks are down right now.
Plus, we'll show you how to turn this into an opportunity - even if it's the start of a market crash...
Why Stocks Are Down Today
Simply put, stocks are down because the COVID-19 coronavirus is still spreading.
No longer is the virus limited to the Wuhan province in China, but it's spreading across the world now.
Over the weekend, Italy reported six deaths from the virus and is closing schools in hopes of stopping its spread. Austria is also canceling trains from Italy.
It's not limited to Europe, either.
At least 12 deaths have been reported in Iran, while South Korea is seeing hundreds of new cases.
The spread is serving a painful reminder to Wall Street that far from being under control, we're in the throes of a pandemic. We simply don't know when it will stop or if it can be stopped.
And Wall Street hates that kind of uncertainty.
You see, the virus is upending businesses across the world, disrupting supply chains and hurting productivity. That means lower revenue and lower profits, with no end in sight.
Apple Inc. (NASDAQ: AAPL) is the textbook case here. The stock had been on a tear, returning nearly 90% gains to investors over the last year thanks to its stellar business. But the stock has plunged over 7% in the last two weeks.
Apple relies on supply chains from China to produce its tech products, especially the iPhone. With the coronavirus hurting China's productivity and making global transit more difficult, investors know it will put a dent in Apple's profits.
Plus, bans on travel within China and consumer fears of catching the virus are hurting airlines the most. American Airlines Group Inc. (NASDAQ: AAL) is down 18% in the last two weeks.
And Carnival Corp. (NYSE: CCL) might be the biggest loser yet. One of Carnival's cruise ships is in quarantine after 174 passengers tested positive for the coronavirus. It's bad enough to have an entire ship out of commission, but fewer people are going to pay for a cruise when the disease is spreading so rapidly.
Carnival issued a warning to shareholders that its earnings will take a hit over the pandemic, and the stock is down over 25% in the last month, putting it firmly in correction territory.
That's the bad news.
The good news is we know the cause behind stocks dropping. This isn't a random sell-off or a sign of a bubble popping. Those are the kinds of causes that could ignite a market crash.
The market is repricing stocks based on the hit their revenue and earnings are taking from the pandemic. We simply don't know how long the pandemic will last or how bad it will get.
But knowing what's causing stocks to drop is actually the first step toward knowing what to do next.
Here are three ways to protect your portfolio and turn the coronavirus sell-off into profits...
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What Happens If the Coronavirus Starts a 2020 Stock Market Crash
These are the best three ways to protect your cash and turn the sell-off into profits.
First, start buying gold.
Gold is a safe haven, so your money will be safer there. If you need stability right now and can't afford to take losses on stocks, then gold is a great choice. And you don't have to move all of your money there either. Upping your portfolio's allocation to just 5% in gold could add balance to volatile stocks.
We like the SPDR Gold Trust ETF (NYSEArca: GLD). It's liquid, reliably tracks the price of gold, and has a low fee structure. You get the benefit of owning gold without the inconvenience.
Second, create a wish list of stocks and buy when they hit your price.
Have you wanted to own Amazon.com Inc. (NASDAQ: AMZN) but didn't want to pony up $2,000 a share? A little volatility could be exactly what you need to get into the world's premier e-commerce company at a steep discount.
Before its surge after its Q1 earnings report, Amazon was trading in a band between $1,700 and $1,800 a share. If you'd like to add a stock like Amazon to your portfolio, you might be able to wait and buy in at that discounted price then reap the rewards when the stock surges again. That could give you a second shot at Amazon's 20% pop since last December, and you'd own one of the best companies on the market.
Of course, you can do this with any stock on your list.
Third, if your risk tolerance allows it and you expect this crisis to drag on, you can buy puts.
Puts give you the right, but not the obligation, to sell a stock at a contracted price by a specific date. That means if the stock prices falls, you can sell your puts for profits. Trading options gives you the triple-digit, even quadruple-digit upside you won't find by just buying and selling stocks.
We recommend looking for puts expiring in 60 or days that are currently out of the money. This means the stock's current price is below the put's strike price, and they're usually cheaper.
Look for puts on companies you know will be hit the hardest if this crisis continues, like airlines and oil companies, or look for puts on the overall market, like the SPDR S&P 500 ETF (NYSEArca: SPY).
Action to Take: Now isn't the time to panic. Add stability to your portfolio with gold and make a wish list of stocks you'd like to buy at a discount. If you expect the markets to fall more, consider buying out-of-the-money puts with expiration dates 60 to 90 days away.
And if you want even more opportunity from what's coming next, you can't miss this...
Learn How You Can Predict the Future of the Stock Market: This little invention is why Tom Gentile's able to collect four separate paydays in under 60 seconds - and why he can see major paydays long before they happen. Learn more...