Displaying items by tag: coronavirus

(New York)

Sudden downturns and crises have a knack for exposing underlying weakness in asset classes, and this coronavirus shock looks likely to expose corporate bonds. As investors will know, there are trillions of Dollars worth of bonds hanging on the lower cusp of investment grade at the same time as high yield issuance has surged in recent years. A quick reversal in economic fortunes could quickly cause soaring yields, delinquency, and bankruptcies. This would lead to a sharp drop in bond prices and potential economic disruptions.


FINSUM: Two key points to make on this story. Firstly, the corporate bond market is now worth $10 tn, 10x the size of 2001. Secondly, because many high yield bonds are illiquid and difficult to trade in periods of uncertainty, investors will try to offload other assets instead, which can spread the panic to other asset classes.

Published in Bonds: IG
Wednesday, 04 March 2020 09:01

A Good Stock Buy for Coronavirus

(New York)

How about some stocks with good income that should stand up well to the coronavirus scare? Sounds good. Well, take a look at the most obvious sector for such: healthcare. Healthcare stocks have great dividend yields right now and should be impervious to coronavirus by definition. Plus, they have a tailwind that only really arrived yesterday—a resurgent Joe Biden, who does not want to tear up the status quo of US healthcare. A couple good funds for this are the SPDR XLV or HGHAX.


FINSUM: This seems like a very good call—good income and a natural defensiveness to the virus scare. Plus, Biden’s resurgence should be positive.

Published in Eq: Healthcare
Tuesday, 03 March 2020 15:30

Schwab Says to Wait on Buying Stocks

(New York)

Charles Schwab has some advice for investors: don’t buy stocks. This is a sharp contrast to Bernstein Research (see our other story today). Schwab says the market just doesn’t have enough upside momentum yet to warrant buying the dip. The custodian says that once you get two solid up days in a row, then it is time to buy. Schwab argues that two good consecutive up days signals a shift in momentum that warrants buying, and given how down the market has been, there will still be plenty of margin to the upside.


FINSUM: We like Schwab’s call better than Bernstein’s, and given today’s performance, it also appears much more accurate.

Published in Eq: Total Market
Monday, 02 March 2020 10:04

Coronavirus May Cut Global Growth in Half

(Washington)

The OECD sounded a big alarm this week about the threat of coronavirus to the economy. The group of rich countries announced that coronavirus may have a devastating effect on the economy, cutting growth in half. The organization said that growth this year could shrink to 1.5% from its previous forecast of 2.9% growth. It said the outbreak and actions taken in China would cut global growth by 0.5 percentage points alone, not even factoring in the rest of the world’s outbreak and response.


FINSUM: So long as the virus keeps spreading and negative headlines keep coming, more and more economy-shrinking actions will follow. Markets will react in kind.

Published in Eq: Total Market
Monday, 02 March 2020 10:03

Don’t Buy Stocks Until You See This Signal

(New York)

Stocks are in a very dark place right now. At the bottom last week, indexes had seen a 15% fall. What comes next is the big question. Have we seen bottom, or are we settling in for a long period of weakness? Analysts from BNY Mellon say you should not buy stocks until you see a certain signal. That signal is clarity on when the virus threat might be abating. “If you think it is essentially a short-term problem, a hit to growth, but then it is over by the summer, then you’re fine going into the market. But if you think it is worse than that, then you have to play that out”.


FINSUM: Here is our view—coronavirus is unlike the other threats indexes have seen since the Crisis. This is not something that can go away instantly (like rate fears), and not something in the Fed’s control. It is an ongoing threat that creates uncertainty. Because of this, worries could linger and stock prices could stay lower for some time.

Published in Eq: Total Market
Page 8 of 11

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…