A Bloomberg article published on March 26th describes that the S&P 500’s sudden uptick as the “quickest three-day advance in nine decades. As absurd as it may seem, the Dow’s already started a fresh bull market—up more than 20% from the lows—after more than $2 trillion in value was created in three days.”
The article notes that it’s difficult to determine whether the sudden rise is a sustainable rally or a “bear-market bounce,” adding that “nothing compares with the coronavirus in terms of shock to the economy. Using history as an imperfect guide,” it explains, “there’s reason to be skeptical—it’s taken stocks an average of 18 months to start to recover after first signs of an economic contraction. But with trillions of dollars of stimulus landing, the case for bottom feeding also exists.”
It also emphasizes, however, that “no precedent exists for the current situation in which a viral outbreak is killing thousands, has shut down economies and forced people to stay in their homes.” As a result, the article notes that there is a wide range of opinions on whether a rally will last.
It cites a variety of views from industry professionals:
- Emily Roland of John Hancock Investment Management says she hears mixed signals from financial advisers. While some say their clients are “petrified,” others are “still fielding requests about where and when money should be put to work.”
- John Stoltzfus of Oppenheimer Asset Management notes a sense of relief with the prospects of fiscal stimulus: “It does appear that there is light at the end of the tunnel and it’s likely daylight and not a locomotive coming down upon us.”
- Katie Nixon of Northern Trust Wealth Management says that predicting a market bottom is impossible, and investors should be wary of anyone who says otherwise. “For risk assets,” she says, “the best medicine is time. Given the nature of the virus, there are still many unknowns regarding when infection rates will begin to fall “as well as the magnitude of earnings declines and the impact of monetary and fiscal policy measures, which is not immediate.”
- Chris Gaffney of TIAA: “The stimulus is definitely what investors are looking at versus those horrible weekly numbers. Congress went big and I think it’s worked so far for investors.”
- Lauren Goodwin of New York Life Investments says investors need more clarity on the economic impact of the virus: “I think case numbers have yet to spike in the U.S. We’re not out of the woods yet.”
- Peter Jankovskis of Oakbrook Investments notes that many company fundamentals have not changed although they’ve taken a hit. He cites Chevron as an example: “We’ve just seen a drop in demand for its product and a very well understood reason for that drop in demand. With a stimulus package on the way, it’s reasonable to assume the shortfall is temporary.”
