The S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) have both tumbled more than 7% over the past 4 trading sessions. This follows an increase in coronavirus cases and a grim economic outlook announced by the United States Federal Reserve last Thursday.

With all things considered, should investors be buying ASX shares during this recent market selloff? 

The bad news 

Coronavirus infections continue surging 

From a global perspective, the coronavirus pandemic is still running rampant. The US experienced a record number of new cases across multiple states last week. State health officials are pointing to an increase in gatherings over the Memorial Day holiday as a catalyst for this increase.

South America has also seen a surge in cases with daily infections surpassing those in Europe and the US. The World Health Organization declared the region the pandemic’s ‘new epicentre’ on 22 May. 

China reported its highest daily increase of coronavirus cases in 2 months, with 57 new confirmed cases over the weekend. The cases identified in Beijing have been linked to its biggest wholesale food market, which has since been shut down. 

I believe the recent selloff combined with fresh news that the pandemic is not showing signs of slowing down will add to the uncertainty and panic in the markets. 

Unemployment crisis 

The US Fed updated its economic projections for the year, predicting a 6.5% drop in its GDP. It also estimates an unemployment level by the end of the year of approximately 9.3%. Whilst this is still dire, it is less than the 13.3% seen in May. 

Australia is in much better shape, with a seasonally adjusted unemployment rate of 6.2% in April. However, much of this can be attributed to the JobKeeper stimulus package that is assisting many businesses to retain their employees in what are extremely tough times.

On Monday morning, prime minister Scott Morrison warned that some businesses will fail when JobKeeper is withdrawn. This creates a lot of uncertainty, and businesses will no doubt be more cautious with spending moving forward. 

Patience is needed 

This is a unique recession, in that it came about because an economic shutdown was required to prevent the spread of the virus. Should the pandemic subside, there is no reason why the economy can’t return to a pre-COVID-19 state. The amount of money going into the economy via quantitative easing is both greater and faster than the responses to crises such as the GFC. Interest rates are still at a record low and will be low for many years to come.

Australia is also one of the leading countries to come out of COVID-19 largely unscathed. However, it is the rest of the world that we are waiting on to resume activity in key sectors such as education and travel.

Foolish takeaway 

I believe that it is a good idea for investors to be patient and wait for the current market volatility and uncertainty to subside before jumping in and buying ASX shares. 

More reading

• The ASX winners and losers from the latest S&P index shake-up
• 3 Warren Buffett quotes to start your week off right
• Shares up? Haven’t you seen the economy?
• These 5 ASX shares were last week’s worst performers
• Why the Reliance Worldwide share price is outperforming today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking for strong returns in the 2020s, then I think having a little exposure to the small cap side of the market could be a good thing.

At this side of the market there are a number of companies that have the potential to grow materially over the next decade.

While it is worth remembering that not all small cap shares will live up to their potential, I feel the two listed below have a good chance of doing so. Here’s why I think they could have bright futures:

ELMO Software Ltd (ASX: ELO)

ELMO Software is a fast-growing provider of cloud-based human resources and payroll software. Its increasingly popular unified platform allows users to streamline processes for everything from employee administration, recruitment, and payroll. Demand for its offering has continued to grow in FY 2020, with management recently providing full year guidance for annualised recurring revenue (ARR) of $55 million to $57 million. This represents an increase of 20% to 24% on the prior corresponding period. The good news is that its current ARR is only scratching at the surface of its total addressable market in the ANZ region. This means it still has a significant runway for growth in the local market and also the opportunity to expand into other key markets in the future.

Mach7 Technologies Ltd (ASX: M7T).

Mach7 is a medical imaging data management solutions provider for healthcare organisations. Its solutions create a clear and complete view of the patient to inform diagnosis, reduce care delivery delays and costs, and improve patient outcomes. Demand for Mach7’s offering has been growing strongly in recent times, leading to the company delivering a 158% increase in revenue to $9.1 million during the first half. I’m confident there will be more strong growth in the years to come, especially after its recent acquisition of Client Outlook. The addition of this leading provider of an enterprise image viewing technology increases Mach7’s total addressable market from US$0.75 billion to US$2.75 billion.

More reading

• Mach7 share price charges 7% higher on acquisition news
• Why Mach7, Meridian, Spark, & TPG Telecom are pushing higher
• ELMO Software share price on watch after upgrading FY20 guidance
• ELMO Software and 2 other ASX growth companies see businesses adapt to a “new normal”
• 3 small cap ASX tech shares that could be stars of the future

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MACH7 FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Afterpay Ltd (ASX: APT) share price was on form earlier today before fading in late trade.

At one stage the payments company’s shares were up as much as 5% to $54.63.

When its shares hit that level, it meant they were up a whopping 580% from the 52-week low they hit in March.

Why has the Afterpay share price been on fire over the last three months?

There have been a number of catalysts for the incredible rebound in the Afterpay share price since March.

The first was the resilience of its business model, which caught the market by surprise. Many investors were sure that Afterpay would struggle in a recession, but the company has proven them very wrong.

Not only has Afterpay continued to deliver explosive underlying sales growth, its bad debts have remained consistent.

I believe the low average transaction values and the flexibility of its business model are to thank for its strong bad debt performance. In respect to the latter, over the last few months Afterpay has required the first instalment upfront for purchases, with three payments to follow. I believe this has reduced the overall risk of each transaction without stifling its growth.

What else is supporting its share price?

Another key catalyst to its strong share price performance has been the emergence of Tencent Holdings on its share registry as a substantial shareholder.

Given how powerful Tencent is in Asia thanks to its massively popular WeChat app, it could potentially open up this key market to Afterpay in the future.

Combined with potential expansions onto mainland Europe and its rapidly growing U.S. business, Afterpay could continue its meteoric growth for a long time to come.

Speaking of its U.S. business, that was another driver of its strong share price rebound. A recent update revealed that it now has over 5 million active customers in the United States using its buy now pay later service.

Impressively, more than one million new customers started using its platform in the country during a 10-week period at the height of the pandemic.

And while 5 million active customers may sound like a large number, there is still a long runway for growth in the lucrative market. Rival Zip Co Ltd (ASX: Z1P) has just entered the United States via an acquisition and revealed that it estimates the retail market to be worth $5 trillion a year.

Should you buy Afterpay shares?

While its shares do trade at a significant premium to the market average and carry a lot of risk, I believe they could still be a great long term option for investors.

In light of this, I would still be a buyer of its shares if you’re prepared to make a buy and hold investment. Though, restricting your holding to a small part of your portfolio might be prudent given the risks.

More reading

• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• Keep a watch on the Zip Co share price and 1 other ASX tech this June
• Sezzle shares and 2 other ASX techs soared up to 50% in the past 4 weeks
• The most explosive ASX tech shares you can buy today
• How I would build a balanced portfolio worth $100,000 with 10 ASX shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Standard and Poor’s announced a big reshuffle to the key ASX indices that could see a number of ASX stocks outperform and underperform in the near-term.

The June quarterly rebalance includes a bigger than normal shake-up of the S&P benchmarks as the March rebalance was held over due to the COVID-19 crisis.

History shows us that index inclusions and exclusions tend to have an impact on the share prices of ASX stocks swept up in the changes.

The quarterly ASX anomaly

This seems to be unique to Australian shares and is called the “index effect”. This market anomaly could form a basis for some short-term trades for nimble investors.

The analysts at Macquarie Group Ltd (ASX: MQG) found that the stocks to be included in the S&P/ASX 100 (Index:^ATOI) (ASX:XTO) tend to underperform in the weeks before they are added to the index.

However, these stocks after two-weeks from their inclusion and the broker speculates this is due to selling from small cap fund managers.

Many of these funds have mandates that prevent them from owning stocks in the top 100 benchmark and are forced to sell.

Large caps that could outperform

This means the Nextdc Ltd (ASX: NXT) share price and Saracen Mineral Holdings Limited (ASX: SAR) share price could be heading higher soon as they are the latest to be added to the index.

They replace international shopping centre owner UNIBALWEST/IDR UNRESTR (ASX: URW) and miner Whitehaven Coal Ltd (ASX: WHC).

Interestingly, large caps that are dropped from the ASX 100 don’t generally come under much selling pressure, added the broker.

Different impact on ASX 200

However, the same can’t be said for the S&P/ASX 200 Index (Index:^AXJO).

“S&P/ASX 200 index additions have typically outperformed strongly in the weeks prior to the announcement of the changes,” said Macquarie.

“Stock performance has often peaked prior to implementation date. ASX 200 deletions have traditionally underperformed as they are removed.”

What this means is that it might be too late to buy ASX shares that are about to become part of the ASX 200 club as the index change comes into effect this Friday.

The ASX 200 stocks that could lag

On the other hand, those getting the boot could underperform from next week.

On that note, the six ASX 200 rejects are the ones to watch. These include aged care company Estia Health Ltd (ASX: EHE), investment platform Hub24 Ltd (ASX: HUB), online lottery group Jumbo Interactive Ltd (ASX: JIN), drug maker Mayne Pharma Group Ltd (ASX: MYX), miner Pilbara Minerals Ltd (ASX: PLS) and wealth manager Pinnacle Investment Management Group Ltd (ASX: PNI).

More reading

• Should you buy ASX shares during this market selloff?
• 3 Warren Buffett quotes to start your week off right
• Shares up? Haven’t you seen the economy?
• Got $5,000 spare? Consider Wesfarmers shares and these 2 other ASX companies
• These 5 ASX shares were last week’s worst performers

Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited and Macquarie Group Limited. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Stating that every Aussie portfolio should hold ASX blue chip shares is a big call. But that’s how confident I am that the 2 blue chip ASX shares below will continue to be good investments well into the future.

There are no certainties in investing (apart from taxes, of course), but here’s why I think Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and CSL Limited (ASX: CSL) would be the best shares for any ASX investor to buy and hold for the long-term.

Blue Chip 1) Soul Patts

Soul Patts is one of the oldest (and bluest) companies on the ASX – it was founded back in 1872 and listed on the stock exchange in 1903. Since then, the company has built an impeccable reputation for quality returns. It invests in a concentrated basket of quality ASX shares, which it aims to hold over the long-term. Right now, these include TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC). It has used this portfolio to pay a dividend every year since its inception, which includes the duration of the Great Depression and both World Wars. Soul Patts is also the only company that has delivered 20 years of uninterrupted dividend increases to its shareholders.

This ASX blue chip share won’t make you rich overnight, but I think it’s an essential share to own for any investor that desires a strong and robust long-term portfolio.

2) CSL

CSL shouldn’t be a stranger to any ASX investor these days. This asx blue chip share has managed to blow past all 4 of the ASX banks over the past 5 years to claim the crown of the ASX’s largest company. Today, CSL is a global blue chip healthcare giant, with two cutting edge divisions (Behring and Seqirus) that dominate the blood plasma and vaccine spaces respectively. Part of CSL’s success story is the focus the company has on Research and Development (R&D), which it invests heavily in every year. This long-term focus has been (and I think will continue to be) the secret to CSL’s remarkable success.

CSL resides in an evergreen industry, is still growing at a healthy rate, and has started paying a rapidly rising dividend. As such, I think CSL will continue to be a fantastic investment to hold for the long-term, and (I think) has a place in every ASX investors’ portfolio.

More reading

• These 5 ASX shares were last week’s best performers
• 3 ASX dividend shares to buy and replace a term deposit
• My ASX share for the week
• ASX 200 Weekly Wrap: ASX bears take control as market volatility returns
• Why I think that Soul Patts is the best long-term ASX share

Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Between mid-February and late March, shares in SEEK Limited (ASX: SEK) fell by around 50% to $11.95. However, since then, SEEK has managed to regain most of this share price decline. The SEEK share price is currently trading at $19.29.

During the initial period of the coronavirus pandemic, investors became spooked due to the sharp fall-off in listing volumes. Billings were down by up to 60% during the week ending 29 March, across all regions.

However, lockdown restrictions are gradually easing across Australia and New Zealand. This is leading to increased investor confidence and rising ad volumes. Investors are becoming increasingly optimistic that the worst of the pandemic is now behind us.

Is the SEEK share price a buy right now?

Job ad volumes starting to rise

New job ads on SEEK are still down significantly on what they were during February and early March, before the full impact of the pandemic hit. However, there are early signs of job ad volume recovery. In SEEK’s latest employment monthly snapshot it revealed that new job ads posted on the Aussie employment platform during the fortnight ended 7 June, were up by a very sharp 60.6%. This represented a further increase on the previous three fortnights of 26.8%, 39.7% and 49.2% respectively.

The Australian market is bouncing back from the pandemic much faster than anticipated in late March. Australia and New Zealand have been two of the most successful countries globally in containing the coronavirus outbreak.

Sectors which are seeing strong growth over the past month in Australia include trades and services, healthcare and medical and hospitality and tourism. In addition, manufacturing, transport and logistics and education and training are all starting to see stronger demand.

July also looks promising. Job ad volumes have historically tended to ease off towards the end of the financial year (i.e. the end of June). July and August tend to then see an initial boost as hirers reaffirm their budgets.

Is the SEEK share price a buy?

Lockdown restrictions appear set to be further eased across Australia over the coming months. There also continues to be strong encouragement by the Australian Government for people to return to work. I think that it’s looking increasingly likely that employment ad volumes will continue to improve significantly over the next few months for SEEK. That is assuming there isn’t a second wave of the pandemic.

SEEK’s second biggest market, New Zealand, also looks set to follow a similar path towards recovery.

From a long-term perspective, I believe SEEK appears to be well positioned for continued growth in revenue and profitability. It has an entrenched and dominant position in its local Australian market and is also continuing to grow its international presence.

While SEEK’s share price has bounced back since late March, it is still well below the 12-month peak it saw in late January.

I therefore believe that the SEEK share price offers investors a reasonable buying opportunity right now.

In light of this, two other online classifieds ASX shares you might want to look are: Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA).

More reading

• 5 things to watch on the ASX 200 on Monday
• 3 five-star ASX shares I would buy today
• 3 of the best ASX 200 blue chip shares to buy today
• 3 ASX 200 shares I’d buy for 2020 and beyond
• What is the ASX impact of a fall in house prices?

Motley Fool contributor Phil Harpur owns shares of carsales.com Limited, REA Group Limited, and SEEK Limited. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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