It's a rough day to be an investor.
U.S. stocks plunged Monday as an oil price war and the spread of the coronavirus put serious pressure on global markets, with the Dow Jones Industrial Average plunging over 2,000 points, U.S. Treasury yields hitting record lows and crude oil prices falling as much as 30%.
With the Dow on pace for its worst trading day since the depths of the financial crisis, market commentators including CNBC's Jim Cramer were preaching caution amid the volatility.
Here's what five of them said Monday:
Stacey Cunningham, president of the New York Stock Exchange, said the "circuit breaker" that triggered a 15-minute halt in trading Monday morning wouldn't cause long-term damage to markets:
"We've triggered these before and the markets continue to operate. It's a long-term market for investors."
Cramer, the host of "Mad Money," likes cold cash:
"I think that cash is king. I don't think that they should feel like, 'Wow, this is a great opportunity' yet. I do feel that a lot of people who are on fixed income are going to struggle right here and think, 'Well, what do we do?' And that's why I'm so hung up on the idea of let's build that portfolio that will have no problem with yield. And there, what you want to do is you want to look at the balance sheet, and if you can't look at that balance sheet, maybe you have to just stay in cash. You have to have some ability to be able to judge whether the company can pay that dividend. But I do think that caution is still recommended, and I do think that the longer that the Treasury secretary doesn't come out is the longer that the limits are going to be in play and we're going to hit that magic level."
Joyce Chang, chairwoman of global research at JPMorgan, saw the fallout as the test for the U.S. stock market:
"What we're going through now is the great liquidity shock that we had been warning about as one of the fallouts from the global financial crisis. So, not only have you had the stress in the credit and the funding markets and having that spill over into the S&P, you have the uncertainty now brought on by oil prices. So, it's a question now of what gives? At what point do people feel like the prices are so low that they need to come back to the table? What pressure can the other 20 countries actually put on Russia, not just Saudi Arabia? But I think the liquidity moves that we've seen have been unprecedented, and it is a reflection of how the market has changed and how the market structure has changed. We just don't have those circuit breakers and shock absorbers anymore. … It used to be that you had banks holding some of the inventory for this. Now, you've really had to have the Fed step in. The rise of algorithmic trading, electronic trading, record inflows because of passive. We thought there would be a testing moment, but who thought it would be on coronavirus or on what we're seeing in the oil markets? … We knew it would be something. And the problem is coronavirus, for those quarantines to work, it's taken eight weeks. Now, we're seeing that China is peaking, but that was an eight-week process and we have a number of countries that are really just coming into this right now."
Jonathan Golub, chief U.S. equity strategist for Credit Suisse, wondered what kind of damage this drop would do to 2020 earnings estimates:
"You can't look at the price action and make a decision. You really have to break it down into two issues. One is what is the damage that this is doing to S&P profits not for the week, but, let's say, over the course of the year? … Our estimate was that we were going to have 6% EPS growth for the S&P. We think that that's going to be about a zero, but that's nowhere near what you would get in a typical recession, but a lot of damage. And the assumption there is that this plays out when you get towards year-end and gets under control. So, the damage in terms of profits is a first-half issue. … You can't look at an illiquid market that's doing what it's doing as a signal, and we don't know, but if you listen to the experts, if you look at what past recessions have meant for earnings, that's probably about as good a guess in a changing world as you can make."
Ruchir Sharma, head of emerging markets and chief global strategist at Morgan Stanley Investment Management, recommended investing based on what he called the theme of the decade: deglobalization.
"You have to look at what are going to be the enduring effects of this? Whether we end up crossing this dividing line and end up getting a vicious cycle or not, what are the enduring effects of this? I think that deglobalization is just going to be the really big theme of this decade. So, you want to sort of be in economies and in markets which are just not going to be that dependent on the rest of the world, and so in that regard, the cheaper places. And we have a new oil order. I think that that is going to last for a while in terms of the fact that the price of oil just keeps sort of settling at lower and lower levels. And so, you want to be more with the oil-importing countries. You want to be in countries with large domestic markets and beneficiaries of deglobalization. Those are the enduring effects. What we have to get through over the next two or three weeks now is hoping that that analysis … is correct, that this follows the China template and it peaks in the next week or so. Because if it goes on for three, four weeks, then my fear about the vicious feedback loop developing with the global bond market and also the fact that the stock market crosses the line of 20%, I think you end up getting something which is much more sinister than what's been priced in to date."