Home 2020 Market Strategists say: “Drop Cautious Stance, Buy Dip in Stocks”

Market Strategists say: “Drop Cautious Stance, Buy Dip in Stocks”



Investors should ‘buy the dip’ in stocks because government and central bank policies will counter the economic blow of the spreading coronavirus, according to JPMorgan Chase & Co. (NYSE:JPM) strategists who had previously told clients to trim risky bets.

The outbreak and its economic implications are “the main source of risk, but the market has significantly repriced this risk over the past couple of weeks,” the JPM strategists wrote in a note to clients Thursday. “We expect the impact of COVID-19 to be temporary and mitigated by broad policy stimulus, even as the virus spread is proving more severe than anticipated.

The JPM stragists have urged investors to boost equity holdings to 6% above what’s suggested by multi-asset benchmarks. That is up from the 5% overweight recommended a month ago. They should reduce exposure to corporate bonds, maintaining an underweight position in fixed income while staying Bullish commodities.

We now see the risk/reward as increasingly skewed to the upside for risky assets and use the current pullback to add back to cyclical exposures at the margin.”

JPM strategists expect all the support from governments and central banks to right the ship later in the year. In the US, the Fed just delivered its biggest cut to interest rates since Y 2008 and the Senate just passed an $8-B emergency-spending bill to fund a response to the outbreak.

White House economic adviser Larry Kudlow said The Trump Administration is going to stay calm over the economic impact of the coronavirus because America’s economic expansion is not at risk.

Thursday, the major US stock market indexes finished at: DJIA -969.58 at 26121.28, NAS Comp -279.49 at 8738.60, S&P 500 -106.18 at 3023.94

Volume: Trade on the NYSE came in at 1.4-B/shares exchanged

  • NAS Comp -2.6% YTD
  • S&P 500 -6.4% YTD
  • DJIA -8.5% YTD
  • Russell 2000 -11.4% YTD

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

The CBOE Volatility Index (VIX 39.67, +7.68, +24.0%) moved up, but stopped shy of reaching its intra-day high from Monday a 43.77%.

Gold rose nearly 2.0% to trade within 20 of its high from 24 February at 1691.70 oz.

Looking ahead: Investors will receive February NFPs, Nonfarm Private Payrolls, Average Hourly Earnings, Average Workweek, Unemployment Rate.

Stay tuned…

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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.