The bottom is close and coronavirus is likely to cause sharp, short recession, BCA Research says

Published Mon, Mar 16 20202:53 PM EDT

The stock market sell-off has gotten so out of control that a bottom should be on the horizon, a strategist at BCA Research thinks. Especially considering it is likely to cause a "V-shaped" economic growth pattern, the firm added. "We can't say it's completely safe to go back in the water until the S & P 500 stops making multi-standard-deviation moves nearly every day, but stocks are oversold and the bottom cannot be too far," said Doug Peta, chief U.S. investment strategist at BCA Research. The S & P 500 tumbled into a bear market last week, closing more than 20% below a record high set on Feb. 19, as worries over the coronavirus' economic blow dented market sentiment. Prior to last week, the U.S. stock market was enjoying its longest-ever bull run, which started in March 2009. The broad index added to its losses on Monday, tumbling another 9%. More than 3,800 cases have been confirmed in the U.S. along with at least 69 deaths, according to data from Johns Hopkins University. Around the world, more than 169,000 people have been infected, the data shows. Governments around the world have taken steps to curb the virus' spread. In Italy, the government imposed a nationwide lockdown. In the U.S., governors from New York, New Jersey and Connecticut all banned gatherings of at least 50 people. Peta noted that, given the restrictions being rolled out to curb the spread and their economic ramifications, "a recession appears to be inevitable." He added, however, that a recession will be sharp and short in nature. "Although our conviction level is low, and our view is subject to change as more information becomes available, we expect that the recession is much more likely to produce a V-bottom than a U-bottom," Peta said. "Pent-up demand will be unleashed once the coronavirus runs its course, stoked by monetary and fiscal stimulus initiatives around the world." Still, investors should be cautious in this volatile market environment, Peta also said. "Cash is worth its weight in gold right now, and those who have it should remember that they call the shots."

Traders work during the opening bell at the New York Stock Exchange (NYSE) on March 16, 2020 at Wall Street in New York City.

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