Trading Nation

Stock sell-off stretches into day two – here's what to watch now

Stocks drop 900 points at session lows on coronavirus fears—Watch five experts break down what to watch
Stocks drop 900 points at session lows on coronavirus fears—Watch five experts break down what to watch

The Dow dropped nearly 900 points as coronavirus fears spiked.

Here's what five market experts are watching now.

Buy the dip on stocks

John Rutledge, chief investment officer at Safanad, said it makes sense to go shopping for discounts.

"Whenever we see terrible news like this we think the entire world's going to end and our world doesn't end really very often. And so this is an incredible opportunity to buy slowly and carefully only the Robinson Crusoe stocks -- the ones you would own for 50 years if you were on a desert island and the ones that are especially in people's sights about the coronavirus. So this will this pass, and we will end up with markets and economies back to normal again at some point later this year."

Apple – the bellwether China stock

Laura Martin, managing director at Needham, said the effect on Apple won't be seen for a while.

"We lowered estimates but we left the September quarter and December quarter intact, but we made the point that if COVID goes past June 1, the supply chain won't be able to start building new products for the annual Apple new product release and it could disrupt Christmas selling season which would then be in the next fiscal year for Apple which is fiscal 2021. So I do think some of what's happening with Apple is that we need to start looking at timeframes as COVID goes longer and figure out at what point Christmas gets disrupted."

Buy low, sell high

Bryn Talkington, managing director at Requisite Capital Management, said it makes sense to buy these pullbacks.

"I would say don't sell the debt because that's really when you're talking to people, not everyone's just sitting in cash, waiting to invest. I think if you are sitting in cash, and I talked about this yesterday, this is a great time to look at what's your dollar cost averaging. But we would say, we haven't even hit down 7%, which is what we saw in August of last year … we had close to a 20% peak-to-trough decline, we had these sell-offs all the time. But if you go back and ask investors, why did the market sell off in August of 2019 or December of 2018 or 2015 or 2016, they won't remember and so it's like we have this recency bias. Everything is so magnified right now. And so it's like everyone says when we're learning finance 101, buy low and sell high. Well folks, this is what buying low feels like. It never feels good."

Stocks too pricey?

Jason Brady, president of Thornburg Investment Management, said valuations don't look attractive here.

"Cash flow generative companies trading with an attractive yield -- those are interesting. Some of the things that folks believe will be cyclical may be less cyclical. JPMorgan is coming out with forecast for 2020 being more challenging. That's been a tough place to be just lately but banks are going to be less cyclical than they were in 2008, so you got to look at valuations, you got to look at fundamentals. I would just say at these market levels, valuations are not particularly supportive."

U.S. economic impact

Joe Davis, global chief economist at Vanguard, said the economic impact is coming off a high bar.

"It's unfortunate to see these events. I would underscore, let's not panic. We were going into the year, we didn't know when this would occur but the markets were a little frothy in one way so we take a step back, let's look at the facts. I think it's very likely that China is going to contract in the first quarter. The persistence of the spread outside of China, we do not know. I think the good news is that the global economy -- the U.S., in particular, and China's level of growth -- it wasn't like that was materially weak going into this downturn so that that's one solace."