The COVID-19 pandemic moved from just a theory to a real-world threat almost a year ago. The search for a vaccine began immediately.
Thanks to cutting-edge tools, researchers were able to create a vaccine in record time. But they could have done much more.
You see, when the coronavirus struck, health care professionals had a chance to reimagine entire systems.
They did just that when they created the vaccine. But they failed to rethink the approval process and the distribution system, which created a missed opportunity.
This failure led to headlines like: “‘It’s a mess’: Biden’s first 10 days dominated by vaccine mysteries” on Politico. Skeptics wonder how 20 million vaccine doses were lost.
Meanwhile, Walmart tracks everyday items like lettuce with innovative tools.
After salmonella and E. coli outbreaks in 2018, the retailer turned to blockchain technology to track lettuce from farm to store.
Blockchain is the backbone of cryptocurrency markets. If the same software that drives bitcoin can now track lettuce, then it can be used for vaccines as well.
Safety was the primary factor behind Walmart’s decision. Should there be another outbreak, Walmart can find the source of the contaminated food in 2.2 seconds instead of seven days.
That can save lives.
In hindsight, a progressive distribution system for vaccines might have helped save lives. But when faced with an opportunity, many — in any field — revert to the status quo.
This is a problem facing investors right now. The distribution system for stock market returns is under stress.
Investors can pretend it will be OK … or choose to adapt.
An Adaptive Way to Beat the Market
For decades, stock market returns flowed through index funds and other popular buy-and-hold strategies. That system looks different now.
Indexes are generally overvalued by traditional metrics. This means they’re likely to deliver lower average returns in the future.
Many investors will be like regulators developing a lifesaving vaccine and simply ignore the changing environment.
Others will seize the opportunity and explore new ideas.
One new idea is short-term trading.
This is a strategy that defines when to buy and when to sell. It’s not blindly buying a stock based on a tip with no plan for when to sell.
With a plan, short-term traders can minimize the pain of a bear market. Predefined sell rules help you avoid losses in a decline.
It’s also possible to benefit from a downturn with put options. This tool can limit risk while delivering gains as prices fall.
Challenging Times Require New Tools
Now, many investors will disregard these forward-looking strategies and stick to buy and hold.
After all, that’s worked in the past. In the long run, buy and hold has always recovered losses.
But it took 13 years after the 2000 peak, 10 years from the 1972 peak and 25 years from the 1929 peak.
Short-term trading helps solve problems such as a delayed retirement or the possibility of never reaching one.
As the vaccine distribution snafu revealed, new ideas can help address old problems even before they are apparent.
Michael Carr, CMT, CFTe
Editor, One Trade