The current bear market could be a very large investment opportunity for investors.
The share market has been sold off as investors fear about what's in store in the coming months. We're a long way from seeing lockdowns unlocking. Global travel is almost at a standstill.
Since 21 February 2020 the coronavirus has caused shares like Australia and New Zealand Banking Group (ASX: ANZ) and Sydney Airport Holdings Pty Ltd (ASX: SYD) to fall by 42% and 37% respectively.
When was the last time so many shares fell so heavily? The GFC. And even then it wasn't as fast as this. The falls we've seen have taken place over a matter of weeks. The GFC's top-to-bottom decline took over a year.
No-one knows what the share market is going to do next. We may not have seen the share market bottom yet. We may already have seen the bottom.
What I do know is that these share prices now look very attractive to me. Some businesses have seen their near-term earnings prospects disappear – but in a couple of years or less they could recover quite a lot of the lost ground. Some other businesses aren't going to see a large profit drop, yet their share prices have declined over 10% as well.
Why I think this could be a big investment opportunity
Countries seemed to have learned from the GFC. Australia, the UK, Europe and so on are throwing stimulus worth hundreds of billions of dollars, pounds and euros at the problem.
Central banks have cut interest rates to ultra lows in the US, in the UK, in Canada and in Australia. Businesses are worth a bit more when the interest rate is 0.25% compared to when the rate is at 1%.
It's very rare for quality businesses like Altium Limited (ASX: ALU), REA Group Limited (ASX: REA), Brickworks Limited (ASX: BKW) to be trading so much cheaper with interest rates so low at the same time.
At some point the pain of the infections and deaths will be slow down. At some point the recession that the world is likely to have will be over. The market will see how cheaper shares look and may send share prices higher quickly, like what happened after March 2009.
I believe this could be a once-in-a-decade investment opportunity for people who have the funds and are brave. This won't be over in three months, but this time next year we could start seeing investor confidence return.
