The week closed out with some level of sanity, even though stocks were in the red Friday. Wall Street is now saying there are signs of stabilization and that investors would be wise to capitalize on assets currently on sale.
The S&P 500 fell a bit more than 3% Friday and rose slightly on Thursday. This comes after weeks of market swings that were more than 5% on the upside and downside.
The S&P 500 is in a bear market, down 29% from its all-time high. Stocks compared to interest rates on treasuries, are priced for recession, which has likely started as the Coronavirus shuts down global economic activity. Still, the difference in expected return on stocks and safe bonds is slightly lower than it was just before the 2008 financial crisis.
Wall Street is now saying it sees clear signs that the market is stabilizing and that, even if the virus continues and stocks fall from here, buying a few stocks and high yield bonds might over in small bites might not be a bad strategy now.
Here’s what the experts said:
Lindsey Bell, Chief Investment Strategist, Ally Invest:
"Unless you have a crystal ball, you won’t be able to call the bottom in the market. One thing is for sure, when the market has dropped by 30% or more it has historically been a good time to put some money to work. In the last two recessions, 2007 and 2000, the market bottomed about 5.5 months after crossing the -30% threshold. In the shortest bear market on record, 1987, the market bottomed 2 months after initially reaching a -30% decline. While we might not know where the bottom is, we believe it may be near.”
Stan Sokolowski, Senior Portfolio Manager at CIFC Asset Management:
“Can I tell you prices have bottomed? No. If you slowly and methodically accumulate positions, are you going to feel good about that? Yes, I think so. Start at the top of the balance sheet — [buy] senior secured debt for example. As uncertainty subsides then you start looking at equities again.”
Sokolowski manages bond funds and some of the risk assets he refers to in the above comment are high yield bonds.
Tony Dwyer, Chief Market Strategist, Canaccord Genuity:
“Following one of the worst weeks of the S&P 500since 2008, there are some constructive signs of stabilization as we look to finish a volatile week.”
Brian Levitt, Global Market Strategist, Invesco:
"We use a long-term historical perspective to adhere to the principles of sound investing, such as consistency and courage, to prevent us from making emotional decisions at potentially inopportune times.”
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