Shares of financial-services firms Goldman Sachs (NYSE:GS), E*Trade Financial (NASDAQ:ETFC), and TD Ameritrade (NASDAQ:AMTD) plummeted 23%, 25%, and 17.9% respectively, last month, according to data from S&P Global Market Intelligence. For context, the S&P 500, including dividends, dropped 12.4% in March.
This month, these stocks are up 7.4%, 9%, and 4%, respectively, through April 7. The broader market has gained 2.9% so far this month.
In 2020, Goldman's stock has returned negative 27.4%, while shares of E*Trade and Ameritrade have returned negative 17.4% and negative 27%, respectively. The broader market has returned negative 17.7% so far this year.
Goldman Sachs, E*Trade, and TD Ameritrade probably each have some company-specific things affecting their stock prices. But the biggest reason, by far, for their stock plunges in March is the market's coronavirus-driven sell-off.
The COVID-19 pandemic has already begun to significantly negatively impact the U.S. and world economies, and many economists and investors believe that a recession is inevitable. Given this expectation that tough economic times are ahead, investors have been fleeing stocks of financial companies, such as investment banks and brokerages, and favoring dividend-paying stocks of recession-resistant companies, such as consumer staples and utilities. This is why shares of Goldman, E*Trade, and Ameritrade fell more than the overall market last month.
I think the market's rebound this month is akin to an April Fool's Day joke on investors -- and I believe it will be short-lived. Now is not the time to be buying financial stocks. Of course, others are opining that they're now a bargain. Only time will tell.
What should most individual investors do now? Favor defensive stocks, particularly dividend-paying utilities and food stocks. (Water utility giant American Water Works and electric utility powerhouse NextEra Energy are great recession-resistant stocks.) And if you want to shop for growth stocks, favor those of companies that are profitable and have wide moats, such as Amazon. (Indeed, here are 10 reasons to buy Amazon stock, including that the company should get a permanent boost from the coronavirus pandemic.)