A second wave of COVID-19 could send the markets spinning this fall — here’s how to prepare

The COVID-19 pandemic may have upended the stock market this spring, but author and finance educator Bola Sokunbi reminds investors not to panic.

“You need to bring things back to your goals and objectives,” said Sokunbi, whose newest book, “Clever Girl Finance: Learn How Investing Works, Grow Your Money” (John Wiley & Sons, Oct. 2020), will be published next month. “Think about your objectives and your time line so you can craft a strategy that makes sense during COVID-19.

“Yes, we’re going through a pandemic, but the economy is cyclical. There’s always something happening: a recession, a war, COVID-19. I saw mass panic in March and April, but remember that you haven’t lost anything until you sell your investments. Until then, it’s just numbers moving around.”

Investors who won’t need to tap into their money for 10 to 20 years, Sokunbi says, should be able to ride out the ups and downs of the current situation, but those who plan to retire within five years should keep their investments liquid.

Understanding you risk tolerance is also crucial during uncertain times like these, Sokunbi notes. If your tolerance is low, you may want to move some money to more conservative investments such as bonds during the pandemic.

Author and finance educator Bola Sokunbi's newest book, "Clever Girl Finance: Learn How Investing Works, Grow Your Money," will be published next month.

“No matter where you stand, you need to plan for the present, too, because you still need to be able to put food on the table,” she said. “Investing is a long-term play. For the moment, ask yourself if you can pay for your current financial obligations and determine if your emergency fund is in place to keep you going for six months if necessary.”

Sokunbi believes there are challenging financial times ahead.

“The indicators showed that the American economy was already on a path to recession when the pandemic hit,” she said. “All the steps that have been taken will just delay the inevitable, because buffers such as stimulus cheques and student loan deferrals are not sustainable. Now, the economy needs to recover and rebuild.”

Since the last global pandemic was in 1918, it’s difficult for analysts to create economic models, because investing was so different a century ago, she points out.

“Any model is speculative,” Sokunbi said, “but be sure that your investment dollars aren’t money you need in the next few years. However, if you have job security and emergency savings taken care of, this might be a time to look for opportunities to grow your investments — but do your research first.

“Perhaps you can be more aggressive if you don’t need the money for 20 to 30 years. There might be opportunities in sectors that have been hit hard by the pandemic: travel, resorts and nursing homes, for example.”

If there is another stock market crash due to a second wave of the pandemic, Sokunbi advises investors, especially new investors, to ensure that they don’t have all their investment eggs in one basket.

“You need broad diversity,” she said. “I like total market funds because your money is spread across a lot of industries, so you won’t be as devastated if one sector doesn’t do well.”

Those who will be retiring within the next few years might want to put their money in bonds and should also have cash put aside for their emergency fund.

“Remember, retirement is not a day; it lasts 20 to 30 years. Just make sure you have what you need to live on for the first few years.”

An emergency fund is crucial for everyone, not just those nearing retirement, she added.

“Have a least six months’ worth of money put aside — even up to a year,” Sokunbi advised. “You want enough saved so you can pay for your core expenses — housing, food and transportation — but not non-essentials such as travel.”

Sokunbi believes that the stock market is currently overvalued and the effect of the pandemic will be felt down the road. She notes that the major economic downturn in 2008 precipitated when the housing bubble burst began in 2006, but “it took 512 days for the stock market to exhibit the impact.

“If the market crashes, another way to invest in yourself is to get creative about the ways you can create long-term income,” Sokunbi said. “Amplify your side hustle or get a part-time job to put aside more money. It’s a good time to make more money, given the uncertainty about the future. Think about ways of diversifying your income streams so you have backup sources to help you weather difficult times.

“If you lose your job or your income is cut, you don’t need to cash out of your investments when their value is low; it’s OK to pause them.”



Even when we aren’t facing a pandemic, Sokunbi strongly recommends reviewing your investment strategy and time line annually or any time you experience a major change, such as a move or a wedding. She also emphasizes the importance of diversifying your investments. If you split them between stocks and bonds, real estate and investing directly in businesses, there is less likelihood all of these sectors will encounter difficulties at once.

“If all three do tank, then you have your emergency fund,” Sokunbi said optimistically.

So, focus on your long-term goals, rather than panicking; instead, adjust your short-term strategy, as needed.

And if you don’t have an emergency fund, what are you waiting for?