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Special Report: Investing in Strange Times

We reflect on lessons learned--and reaffirmed--over the past year of investing amid market uncertainty.

Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

In the chaotic early days of the coronavirus pandemic, as markets plummeted and countries rushed to shut down their economies in an attempt to slow the disease’s spread, investors who turned to Morningstar found much-needed perspective to help escape the fear and panic.

The daily U.S. Markets Barometer that sits atop the home page might have been a solid red, but, underneath, a long-term investing perspective reigned. Morningstar’s analysts and writers reiterated their patient investing philosophy, providing the insight and data investors needed to stay cool and calm.

There was healthcare equity analyst Karen Andersen who, on March 10, 2020, offered detailed analysis on why she believed a vaccine could be developed, approved, and administered to hundreds of millions of people globally within a year--an event that would be unprecedented in the history of vaccine development. Two months later, before any clinical data had been released, she listed six vaccines most likely to come to market by year-end. Vaccines from Moderna MRNA, Pfizer PFE/BioNTech BNTX, and AstraZeneca AZN were approved in December, and the Johnson & Johnson JNJ vaccine was rolled out this March. More than 300 million doses have been administered around the world, just as Andersen predicted. Andersen's work during the pandemic has been foundational at Morningstar; it's the basis of our analysts' projections in sectors across the economy on how quickly businesses would be able to recover.

In that same March 10 article last year, economics analyst Preston Caldwell shared his forecast that global and U.S. gross domestic product would take a short-term hit but that there would only be minor, if any, long-term harm to the world's economies. Later in 2020, Caldwell further supported his analysis by looking back at five similar short-term shocks to the economy over the past 100 years (caused by wars, depressions, and other pandemics). He found that, in the long run, none of these events fundamentally changed the economy. The short-term hit to U.S. real GDP growth came: a decrease of 31.4% in the second quarter. But growth rebounded strongly in the third and fourth quarters. Today, Caldwell is even more optimistic as we reach herd immunity. He projects U.S. real GDP growth of 5.3% in 2021 and 4% in 2022, and he forecasts GDP to surpass Morningstar's pre-COVID-19 expectation by 2022.

In April 2020, Morningstar researcher Paul D. Kaplan reviewed 150 years' worth of market returns and crashes. He showed that crashes are normal occurrences (one happens about every eight to nine years on average) and that they provide the risk that is the grist to long-term profits for investors--which is why it is important that investors stay invested and not panic. Three months later, the market returned to its previous high and has since moved higher.

As we look back over a tumultuous year, it is clear that those investors who kept an eye on the long term profited. Research that rises above the day-to-day chaos and puts it into context can help you accomplish that. That’s what we’re here for: to provide the insights you need to make sense of the market’s past, present, and future.

This long-term mentality is just as important during the highs as it is during the lows. As we experience the current frenzy for meme stocks, SPACs, ARK, cryptocurrency, digital collectibles (or whatever), it’s hard not to get sucked in. But manias are short-term; they always end. Morningstar analysts are already sounding alarms and providing perspective.

Dabble with a small portion of your portfolio if you must, if only to have fun. But researching the risks, keeping an eye on your goals, and staying the course should again be the winning choices--in the long term.

Uncertainty can plague even the most confident investor. These resources seek to offer clarity about investing in strange times. We reflect on the past year’s market movements, how to engage with new trends as an investor, and what 2020 reaffirmed to us about investing--and taught us about ourselves.

Investing in the Time of COVID-19 What Happens to Our Investing Habits in Times of Turmoil This is the opportune time to take notice of our financial habits.

In Long History of Market Crashes, Coronavirus Was the Shortest The year may have been unprecedented, but the best course for navigating a market dip stayed the same.

These Sectors Performed Best and Worst During the Pandemic We look at the industries for those most affected by social distancing and stay-at-home orders.

One Year Since the Coronavirus Crash: U.S. Market Volatility and Performance in 7 Charts Investors who stood firm were rewarded as the markets recovered, and then some.

One Year Later: Lessons Learned From the 2020 Bear Market The biggest takeaway from that period is not to panic when the market tumbles.

My 2020 Investment Lesson: The Peril of Overconfidence A little learning is a dangerous thing.

Investing in the Time of Meme Stocks What's the Best Way to Start Investing? Three arguments against getting started in investing with individual stocks.

There's More to Investing than GameStop and Robinhood Interested in trading stocks? Here are some things to know before you get started. What You Need to Know About Short-Selling and the Stock Market We examine the potential market implications of events like the GameStop stock saga.

The Final Word on Game Stop Reality check: For whom does the market really work?

What to Do When the Market Is Manic Why doing a whole lot of nothing might be the ultimate contrarian approach.

With GameStop, Hedge Funds May Enjoy the Last Laugh Do individuals stand to benefit from penny stocks in the long term? Not likely.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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