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If You Can Manage the Risk, the Coronavirus Has Presented Opportunity in this Market

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Economist Mohamed El-Erian sees opportunities for investors who can manage risk during this coronavirus induced stock market dive.

“Those people who entered this defensively and have a massive appetite for volatility, there is starting to be real pockets of value,” Mr. El-Erian told reporters.  

For most investors, I think you still want to be cautious out there,” he said.

Mr. El-Erian said the companies risk-tolerant investors should be looking at are those whose businesses will benefit in the “post-crisis world.”

As long as those companies have strong balance sheets, the economic shock from the coronavirus should not be crippling. In fact, those companies will “come back really strong,”

That’s why I’m saying there is areas of long-term value, even now, before we turn around. But you have to have a tremendous ability to withstand volatility,” he said.

However, Wall Street slipped Monday as the rapidly spreading coronavirus forced more US states into lockdown, eclipsing optimism from an unprecedented round of policy easing by the Fed.

After cutting interest rates to near Zero and offering to purchase more Treasury bonds and mortgage-backed securities last week, the Fed decided to lend against student loans and credit card loans as well as buy bonds of larger employers, Reuters said.

The unprecedented moves lifted the US stock index futures more than 3%, but the mounting death toll from COVID-19 and growing evidence of the economic damage to corporate America drove the main indexes back into the Red.

Monday, the major US stock market indexes finished at: DJIA -582.05 at 18591.99, NAS Comp -18.84 at 6860.03, S&P 500 -67.52 at 2237.40

Volume on the NYSE came in at 1.6-B/shares exchanged

  • NAS Comp: -23.5%
  • S&P 500: -30.8%
  • DJIA: -34.9%
  • Russell 2000: -39.9%

HeffX-LTN overall technical outlook for the major US stock market indexes is Bearish in here.

Looking Ahead: Investors will receive New Home Sales for February Tuesday.

Have a healthy day, stay at home!

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.