This has been the most rapid drop in the stock market EVER! The closest one to do this dramatic drop was in 1987 with the oil crisis. We are now facing an oil crisis but that is in small part of the major issue with the Covid-19 virus shock which is a global epidemic that will affect substantially affect the economy. The government has just started the stimulus plan early to keep the economy and banks going. The House has just passed the $2 trillion stimulus plan which was recently signed by Senate and President Trump. In 2009-2009 in the Great Recession, the stimulus plan came later in the recession which meant a major mess for the economy and affected many households and businesses.
This expected stimulus plan will bring money for big businesses, small businesses, wall street, and families almost immediately. The form of this stimulus is planned to come quickly without major paperwork to help Americans as quick as possible. In addition, the Fed Chairman Jerome Powell also planned earlier this week to provide Unlimited QE, purchasing of Mortgage-backed Securities and stocks, and possibly even supporting the stock market by purchasing ETFs. The government even has given a contract to BlackRock to stimulate the economy by purchasing in the bond market.
There will be plenty of bargains moving forward but a couple recent ones that come to mind are in the mortgage-backed securities market. There are two stocks AGNC Investment Corp (AGNC) and Annaly Capital Management (NLY) that invest in primarily Agency securities. These Agency securities are backed the government which means they are insured by the government. These are the safest of the mortgage reits and will perform well in the long term. The short-term will have plenty of volatility and can definitely go down further in the market.
On the closing of March 27, 2020, Annaly Capital Management (NLY) closed at $6.13 with a yield of 16.3%. AGNC Investment Corp (AGNC) closed at $13.15 with a yield of 14.6%. These dividend yields are absurdely high and most likely will drop as book value goes down with the economy recession. However, there stock prices are very cheap and for the long-term investor will bring massive returns.
For the more conservative investor, I recommend the preferred shares which all earn a substantial return over 10%: NLY-PD returns 8.9%, NLY-PG returns 8.3%, AGNCN returns 7.8%.
I recommend watching these and purchasing them at a LOWER price as the bear market continues. There will be plenty of bargains for the long-term investor.
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