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Coronavirus fears slam stocks—what investors should watch now

Stocks drop sharply on coronavirus concerns—Here's what three experts are watching

Coronavirus chaos reigns.

Stocks fell sharply Monday as the number of coronavirus cases outside of China surged, with the Dow Jones Industrial Average shedding more than 1,000 points intraday and erasing its year-to-date gain.

But as investors fretted over the outbreak's potential impact on the global economy, market commentators largely agreed that this drop, however vicious, was warranted after months of a seemingly unstoppable rally.

Here's what three of them said Monday about the plunge:

Looking beyond Wuhan

Chris Ailman, chief investment officer of CalSTRS, advised investors to think long term:

"We're going to sit back. The market is finally reacting to the risk of the virus, something that I was surprised [didn't happen] last week when we hit record highs. We don't even know the full measure of it yet, obviously. The fact that cases are dropping in China is a good sign, but when they open up their economy and people travel, that's going to probably increase the number of cases. So, you've got to think long term and you've got to back away from a day like today and not just react. Don't think in 91-day increments, but think more in decades like Warren Buffett does."

Coronavirus and the global economy

Kevin Caron, co-founder and senior portfolio manager at Washington Crossing Advisors, said the global economic backdrop still looked relatively strong:

"There's a lot of good things going on beyond the immediate news, [including] the improvement in tone in terms of the overall global economy. There was a lot of pump-priming from central banks over the last year or so. There has been a drawdown in inventories around the world and that could lead to a more sustained pickup this year. Unfortunately, right at the moment where you would be looking for that pickup to start to get some real lift, we've been hit with this coronavirus, which does have some real impacts. There are very significant supply chains in China, and when you look at the IHS Markit Services survey from last week, it was a very large drop here in the United States. So, we're weighing the bigger picture, which is one that is, we think, going to move towards an improved economy later this year, but we have the near-term challenge and uncertainties surrounding coronavirus and the spread of that virus, which has significant impacts, as we see today, in the near term."

China virus impact

Keith Lerner, chief market strategist at Truist/SunTrust Advisory:

"We've gone over six months without a normal correction. You layer on the coronavirus, which provides more uncertainty, and we think the risk-reward near term remains mixed on it. So, from our perspective, what does that mean? That means maybe bringing equity allocations that have run up quite a bit back to targets, maybe a little bit of cash. In some of our more tactical portfolios late last year we added a little bit of gold. I just want to say, longer term, we still think the bull market trend is intact, but when you shut down the second-largest economy in the world, that's going to have some impact."