Despite a positive start for Monday’s session, Jim Rogers, co-founder of the Quantum Fund and chairman of Rogers Holdings, continues to ring a bearish alarm bell for U.S. markets. However, he believes that investors can now find opportunities in Asia and Russia. Additionally, Sylvia Yeh of Goldman Sachs Asset Management, unpacks the pressure that the U.S. municipal bond market is confronting amid the coronavirus crisis.
‘We need to see the other shoe drop’ before getting back into stocks: Minerd
‘When the markets start to see some of the data on unemployment rising and economic growth and corporate earnings contracting, there will be another level of panic in the market.’
Scott Minerd is looking for opportunities to dip his toes into the coronavirus-stricken stock market. However, you may not find him wading into equities anytime soon if the outlook for the economy is as grim as he is forecasting.
The global chief investment officer at Guggenheim Partners, in a Sunday research report, estimated that the worst may be far from over for the S&P 500 and the broader market, which is attempting to face a harsh new reality framed by a global economic slowdown created by the outbreak of COVID-19.
As of Friday’s close, the S&P 500 SPX, 4.754% was at 2,488.65, down 26.5% from its Feb. 18 record closing high. However, Minerd estimated that the index could justifiably fall to 1,500 over time if the realization of woeful corporate earnings and the economic devastation of the pathogen sets in. A drop of that magnitude would represent a worst-case scenario, based on Guggenheim’s models.
Minerd explained it this way:
|BUT ONE THING I WOULD CAUTION IS THAT IF EARNINGS CONTINUE TO FALL AS I EXPECT THEM TO, S&P EARNINGS COULD GET AS LOW AS $100 THIS YEAR. GIVEN THE TRADITIONAL MARKET MULTIPLE OF ABOUT 15 TIMES EARNINGS, THAT WOULD PUT THE S&P AT ABOUT 1,500, STILL ABOUT A THOUSAND POINTS LOWER THAN WE ARE TODAY. CERTAINLY, WE ARE DOWN FROM THE RECENT PEAK OF 3,386, SO WE’VE MADE A BIG MOVE, BUT WE STILL HAVE A PRETTY GOOD MOVE TO MAKE. INVESTORS SHOULD PROBABLY FOCUS THEIR ACTIVITY ON BONDS AT THIS POINT.|
Emerging markets could be the next domino to fall, and we are keeping an extremely close eye there. As a percentage of #GDP, governments and corporations in the emerging markets have significantly more debt today than they did during the Asian crisis. t.co/fQIH2Rww3o pic.twitter.com/C21JhehjQ3
— Scott Minerd (@ScottMinerd) April 6, 2020
— Invariant Perspective (@InvariantPersp1) April 6, 2020
IMF SAYS SEES LIMITED BUT ENCOURAGING SIGNS OF RECOVERY IN CHINA, CANNOT RULE OUT RESURGENCE OF PANDEMIC IN CHINA AND ELSEHWERE
— *Walter Bloomberg (@DeItaOne) April 6, 2020
Spoke with the CEO of a small company who said "anyone who thinks you can just flip a switch and restart a business after it's been shutdown for two months has never operated a business."
— Morgan Housel (@morganhousel) April 5, 2020