March 12 is likely to be added to every finance 101 textbook that's printed going forward, with both the S&P 500 and Dow Jones Industrials falling close to 10%, and the Nasdaq Composite barely missing that painful decline, losing "only" 9.4% on the day. Investors haven't suffered through a day this bad since the 1987 crash. Even during the worst of the global financial crisis just over a decade ago, stocks never came close to falling so sharply.
And as bad a day as it was for the entire market, some individual stocks had it even worse: Appian (APPN 9.45%), New Relic (NEWR 3.01%), Paycom Software (PAYC 7.13%), Pegasystems (PEGA 4.58%), and Upwork (UPWK 0.95%) all finished the day down between 12% and 14% in very heavy selling.
Today's massive market drop -- and the decline for each of these five stocks -- was essentially all a product of heightened fears of the impact the novel coronavirus behind COVID-19 is having around the world. Last night, U.S. President Donald Trump announced broad travel restrictions between the U.S. and Europe in an attempt to arrest the spread of the disease, compounding the economic impact the coronavirus has already had on the global economy.
Today's sell-off is a clear signal that investors are now expecting things to get much worse, more companies will take steps to limit employee travel, and more government actions to limit travel and large public events will be forthcoming. Major professional sports leagues are postponing their seasons to reduce the risk of exposure.
Simply put, the effort to reduce the health risk that COVID-19 poses, particularly to at-risk populations, is enormous and likely to grow. That's almost certainly going to have massive economic repercussions, and investors are selling out of every stock they perceive as being exposed to the downside.
As painful as today was for these five stocks, it only compounds what has been a rough past few weeks:
And it's not much of a stretch to expect to see prices fall even further as things play out. There's so much we simply don't know right now about how things will play out, and that uncertainty will continue to drive the market and could drive prices down even more.
But this is where investors have to look at the bigger view. Things are scary now, and the bottom feels like it's nowhere in sight. And while things may get worse before they get better, life will also get back to normal at some point. It may be a few weeks or a few months, or in some cases it could take longer. But when we start looking out a year or two or more, life will return to normal.
As for the five tech stocks above, what they offer to their customers today will be just as relevant. Chances are, it's going to remain just as important in the weeks to come as it did a few weeks ago. The big thing that's changed is people's perception and worries. Investors who avoid the mistake of selling in fear and hold for the long term should make out fine.
The people who take advantage of these sell-offs to buy great businesses at better prices will make out even better. It may take some time for those investments to bear fruit, but given time, the market rewards investors who focus on the long game.