Mixed-Industry Concerns Around Coronavirus Impact
Stock Market Continues Forward
Joining Seana Smith on “The Ticker,” Yahoo Finance’s Anjalee Khemlani and Chief Market Strategist at Capital Wealth Planning Jeff Saut, discuss the latest Coronavirus developments and the potential for global economic impact.
It’s no surprise that some industries could suffer tremendous impact from the emerging Coronavirus. Khemlani shared the following thoughts on the potential for impact.
“Travel and Leisure are definitely getting hit. “We won’t know actual impacts until possibly the end of quarter-one, but we are looking at cruise lines, airlines and some hotel brands as vulnerable. It’s a mixed bag, and a lot is uncertain because some industries, such as the airlines, don’t have a cohesive plan when it comes to policies and restrictions.”
When asked how big of a threat the Coronavirus is to U.S. markets after the prior weeks’ selloff, Saut shared it’s not that big a threat to the U.S., and is more of a threat to Asian markets. “So far the stock market hasn’t paid much attention to this virus. Individual companies have, but the overall stock market looks to be receiving an energy peak this week. I would not be chasing stocks on a short-term trading basis right now. Longer term, the secular bull market is still firmly implanted.”
Smith asked Saut a more direct question regarding his latest stock activity. “I bought Flir stock today because they have an automatic braking system that uses thermal imaging to look four-times farther ahead than headlines at night to help stop cars faster; it’s going to be a big deal. The other stock I bought in recent history was Mesa airlines because the thought is that the new CEO, the ex-COO from SkyWest, is going to fix some of their luggage and flight delay problems.”
An Overbought Market
Saut shared that he believes the market is currently overbought on a short-term trading basis. “The market can overcorrect an overbought position by going sideways or having a marginal pullback. There have been divergencies in NASDAQ between price and breadth, but on a trading-basis, I would not be chasing stocks this week.”
In response to a question about strength or excessive optimism in market fundamentals Saut emphasized optimism. “On a short-term basis, optimism is excessive on the upside. We received a 3.6% pullback since the January 17 peak; if we get another, it’s time for buying. The secular bull markets last 15-20 years and we’re almost 11 years into this one, so we have 5-7 years left.”
In closing, Smith asked Saut if earnings are as strong as we need them to be. “Earnings are probably not as strong as we need them to be but will probably hookup at the end of the year. Sixty-six percent of the 900 companies reporting as of last Friday beat estimates, and 64% of reporting companies beat revenue estimates.”