Holed up at home in Milan, Angelo Meda, head of equities at Banor SIM SpA, says defensive and technology equities less directly affected by the virus look appealing, even if he doesn’t see a bottom for equities just yet. He started to snatch up some consumer-staples names on Monday.
“It’s time to buy something, especially in the defensive sectors,” he said. “If you can buy some 3% or 4% dividend-yielding defensive stocks, why not?”
He’s also looking at the energy sector, where shares have tended to bspounce back whenever oil approaches $30 per barrel and the demand shock isn’t enough to spur further declines. WTI crude dropped as much as 34% to $27 on Monday, the lowest since its 2016 trough.
“The challenge will be to distinguish the economic and earnings impacts that are temporary from those that are long-lasting,” said Perkin at Eaton Vance who manages around $45 billion of equity assets. “Not everything that has fallen will bounce back.”
While cases of the coronavirus look set to climb across the developed world, the bull case -- at least relative to the permeating doom and gloom -- remains that the disease will only mount a temporary challenge to a global economy that was trudging along at a decent pace before that. The stronger-than-expected U.S. jobs data released Friday underscored that point.
Policy makers also look poised to unveil bolder measures to cushion the economic fallout, with the U.S. administration drafting urgent measures and France calling for a “strong, massive, coordinated” response across Europe.
A recovery is likely to take hold from the third quarter onward, as the virus’s shock doesn’t come from fundamental challenges in the economy, Morgan Stanley economists said on Sunday.
Academy Securities’ Tchir thinks now isn’t the time to panic when the S&P 500 is already around the 2,800 level.
“I will be buying some equities, adding some credit risk and shorting treasuries here!” he wrote in a note. “I will also be trying to re-fi my mortgage.”
This article was provided by Bloomberg News.