Coronavirus Panic Stokes Market Volatility and Steep Decline
What’s Next for the Foreseeable Future?
Capital Wealth Planning Chief Market Strategist, Jeff Saut joined Yahoo Finance’s “The Ticker” to discuss market volatility amidst Coronavirus, and the opportunities available for people looking to invest.
State of the Market
With the Dow off by over 700 points and extreme volatility dominating the market, Saut was asked to share his thoughts about the current situation and where he thinks Coronavirus will leave the U.S. economy.
“Our short-term proprietary model flashed a cell signal in mid-January. We wrote about it and told people to sell all trading positions and raise cash. We raised some 30% cash, but we did not think the decline would be this severe or this quick. It’s the fastest decline from new all-time highs in the history of the market.”
Markets were down yesterday 32.7% from their all-time high. Saut discussed how this marks the beginning of a bottoming process.
“This is the way you make bottoms. Most of the finger-to-wallet ratios we look at are indicating that the markets are trying to make a bottom. When you get multi-session “up-big, “down-big” scenarios, it’s usually telegraphing to you that the equity markets are trying to form a bottom. So, yes, we are in a bottoming process. I prefer to wait and see if a bottom has been established and then pay up. But for a lot of people who try to catch a bottom on the way down, they get hurt.”
Revised Expectations Moving Forward
In a rather resolute move, Bank of America has stated that the Coronavirus will cause global recession in 2020. When asked if he thinks an upcoming recession will be as severe as it was 20 and 30 years ago, Saut responded no.
“I’ve been adamant for a while that we were not moving into a recession, but I don’t know now. Businesses are closing and that’s got to have an economic impact. But even if I cut my earnings estimates, I’ve cut them from 177 to 173 to 165. If that 165 proves correct, you’re trading at less than 14x times forward earnings. Stocks are not that expensive.”
Putting Money to Work
Responding to what he thinks investors with money should favor at this point, Saut shared his favorites and touched briefly on the idea that good things happen to cheap stocks.
“I like technology and financials. Additionally, energy is trading below 2009 lows, which makes it a safe play. For retirees looking for monthly or quarterly income, the mid-stream MLPs make a lot of sense to me.”
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Highlight: We "did not think that the decline would this be severe, or this deep, or this quick, quite frankly," @cwp_advisor's Jeff Saut. "We think we're in a bottoming process." Also talks about opportunities in tech, financials, and energy. More: pic.twitter.com/UgUvVwKoej— Yahoo Finance (@YahooFinance) March 19, 2020