Coronavirus chaos reigns.
Here's how five market commentators interpreted this market downturn:
Stephanie Lang, chief investment officer at Homrich Berg, said the market may be nearing a bottom:
"What we're trying to determine at this point is, is this going to be a short-term economic shock or is this going to start feeding into business confidence and consumer confidence where you ultimately see businesses get worried and start laying off workers and that translates in the consumer? The consumer has held up the economy the last couple years, so, we're looking for signs that there is some impending weakness. I think from a stock market perspective what you have to determine is what is actually priced in at this point. ... Right now, earnings expectations are still around 7% for 2020. We don't think there's any possibility of that, but if you assume flat earnings for 2020 and apply a 16-times multiple, we could see a little downside from our lows on Monday, maybe 5-10%. So, I think we're getting in the vicinity of where stocks could be more attractive. It all depends on, ultimately, how the coronavirus plays out and what kind of economic shock there is. But were getting optimistic that we're getting closer to those bottoming levels."
Jim Paulsen, chief investment strategist at Leuthold Group, said there may be a bright spot in this fallout:
"I don't know where the bottom is here. I think we're close to it, though. I really do. This thing just oozes panic to me and the movement, the ferociousness and speed by which stocks have fallen and, now, bond yields looks more like the end of a colossal panic than the beginning. So, I would start ... to nip away at it on these kind of down days that we have. ... No doubt the economy's going to slow. We're going to get bad economic data coming out. But the real question isn't, is it going to be bad? The question is, is it going to be worse than feared? Because if it turns out that the economy isn't collapsing as bad as we feared, that's good news. So, we could have a bad news becoming good [scenario], I think, over the next few weeks. I'm welcoming just being reconnected to some fundamental information flow."
David Kostin, chief U.S. equity strategist at Goldman Sachs, said finding a level of guidance in this volatile market is key:
"Guidance is nonexistent. And we acknowledge the fact that ... the news flow is coming in every day and airlines are having their challenges and there's quarantines in different areas, businesses, people are working from home. So, all these things are happening, but that doesn't mean that the market isn't trading, and so we need to have some level of guidance or some level of estimates, a way of thinking about this. And so, what we've done, on an annual basis, we can look at where the profit growth is likely to be, and we know that revenues are likely to be coming down. ... Obviously, the market's going down. It's a little hard to navigate that. But some of the real estate companies which have more contractual revenues and have a dividend yield, ... those companies trade around 20 times earnings. Fifteen times for the rest of the market. So, you're paying a premium for that. So, you recognize that that's one of the challenges in the market."
Bill Nygren, portfolio manager at Oakmark Funds, clarified how investors could rebalance their portfolio:
"We follow our own advice at Oakmark. ... Most of the Oakmark managers, myself included, have added to their positions in the Oakmark Funds in the past two weeks. I've done that a couple of times. Personally, almost any time the market goes down 5%, I take some of the cash in my account and buy more of the funds that I manage. And ... we come on [CNBC] all the time after volatile periods and say that investors should rebalance, and I think sometimes they don't really know what that means. If you think about somebody who had a portfolio that, a few weeks ago, Feb. 20 when the market had peaked, was about 50% equities and 50% bonds, today, that portfolio — because equities have gone down 20% and long bonds have gone up 20% — is now only 40% equities and 60% in bonds. So, it's gotten out of the balance that they had originally targeted for their assets. So, the typical investor today should be thinking about selling 20% of their bond holdings and reinvesting in equities just to get back to where they were in terms of their account balance just last month."
Steven Wieting, chief investment strategist and chief economist at Citi Private Bank:
"We have ballparked this event as a 20% decline in U.S. shares with those impacted industries and some international markets that are higher-beta taking a larger drop. And we can't be exactly precise if it would be a 25% down move. I think that what's happened recently with credit markets having weakened and still to pass that impact, particularly outside of the energy sector, on to markets is a negative outcome. It really, really begs for a stronger policy response. Ultimately here, we're facing what is akin to a natural disaster. It's something that is, as [Bank of England Governor] Mark Carney said [Wednesday], ... not a financial crisis, it's not a business cycle that had boomed and has to go bust, so, we could take a very sharp hit here across the world economy in the first half of the year and, in fact, rebound from it. So, I think that, again, argues for something that I would ballpark at 20% with much worse [declines], of course, in some areas, rather than pick some massive number."