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A stock market crash often refers to a sudden drop, typically in double digits, for several days. We’re fine as the cleaning fees for almost all imports in the US were announced at the beginning of April.
Technology-driven Nasdaq Composite It fell almost 12% in just two days, S&P 500 and FTSE 100 The index was also slumped in two digits. These were one of the steepest short-term drops ever.
Many stocks have been rebounding strongly since those crazy days. NASDAQ increased by 25%, while FTSE 100 increased by 14%.
Of course, the market could always tank again. In particular, uncertainty about tariffs remains. But here are three lessons I took away from that April slump.
Prepare dry powder
Donald Trump was elected in November, and as a result, he was cheered by the market for his promise to cut taxes and regulations.
However, when I launched a trade war with China in mid-2018, I remember his first term as president. My portfolio lost more than a third of its value within six months!
Not only was this jarring, it was also frustrating. At the time I was completely invested and not in a position to deploy a significant amount of money into stocks during sales. In hindsight, I thought this was an opportunity to miss out on after the market recovered.
In November, I sold my holdings at the chip equipment giant. ASML. This is a great company, but it was traded at a premium multiple that I thought might not be sustainable during the US-China trade war.
Diageo It was another stock I sold in January. US tariffs are easier to manage for spirit giants, but they rarely encourage growth.
So, when the “liberation day” arrived, I prepared some dry flour to work from the sale of these two stocks.
Prepare the list
Next is to have a list of stocks to consider buying in the case of a tank.
I had some on my wish list heading into April. These include Ferrari, Intuitive surgery, Shopify (NASDAQ: SHOP), Palantirand the owner of Holiday Inn InterContinental Hotel.
All of these were stocks I wanted to buy or own more, but each one seemed too expensive. But with my ready-made purchase list, I was ready to take advantage of the fear-driven sales.
Don’t wait
Finally, there is the temptation to wait and see if the market continues to decline. In other words, if your inventory drops by 40%, it may drop 45% or 50% before pressing the buy button. However, stocks can rebound quickly!
However, when Shopify’s shares crashed almost 24% in two days, I quickly added it to the e-commerce enabler retention. I did so despite the risk that the price increase caused by tariffs could lead to a decrease in consumer spending, which could affect Shopify’s transaction-based revenues.
Shopify is the go-to platform for online entrepreneurs and medium to medium-sized businesses, bolstering millions of merchants around the world.
The fact is that e-commerce is still growing, especially in emerging markets. Shopify is a good place to ride this wave as businesses shift online.
Since early April, the stock has been rebounded by 38%. I was able to take advantage of this dip by knowing what I wanted to buy, having the cash to do so, and hitting while the iron was hot.