According to veteran emerging markets investor Mark Mobius, global financial markets have probably not yet hit the “absolute bottom”. Therefore Mobius called on investors to keep enough cash at hand so that they can purchase stocks when the market goes down further.
“I don’t think we’re at the absolute bottom yet because the implications of this shutdown are incredible,” Mobius, the founding partner of Mobius Capital Partners, said. “Things are pretty bad” from the perspective of corporate earnings, he added.
The earnings season involving the major global companies will kick start this week with companies like JPMorgan Chase, Wells Fargo and Johnson & Johnson announcing their quarterly reports. A real sense of the extent to which the large companies have been hit by the coronavirus pandemic will become clear to investors after the first batch of results are disclosed.
According to Refinitiv, there is an expectation among analysts that there will be a 10.2 per cent year on year decline in the S&P 500 earnings growth for the first quarter.
With the number of coronavirus cases and fatalities in the United States spiking sharply in the past one month, markets have been volatile. A 19 per cent drop was noted since the S&P 500′s all-time high on February 19.
But one of the most important considerations for investors is their quest to know whether the financial markets have actually bottomed out. However, according to Mobius, investors should keep more cash on hand to buy stocks in the eventuality of the market hitting another bottom.
“Although there are some opportunities to buy, I would say it’s probably a good idea to keep some powder dry for another downturn. We might see a double bottom,” he said.
Mobius called for the economy to open up again “in some way” while also suggesting that the negative impact of the coronavirus induced protracted lockdown on the US economy would be “incredible”.
The coronavirus pandemic has forced governments of many countries to issue lockdown, stay-home orders and temporary closure of non-essential businesses to curb the spread of the coronavirus pandemic and currently many governments are debating when to open up the economies and start business as usual.
But Mobius said: “I think we have to open up again in some way, because otherwise the collateral damage is going to be incredible. You think about the people who live day to day … you got to get the economy going again.”
He wanted the economy to “open as soon as possible,” but won’t do so “until we know this country is going to be healthy,” US President Donald Trump last week.
There can be a spike in infections in the summer if the US government lifted off stay-at-home orders, school closures and social distancing after just 30 days, according to a recent projection by the US Department of Health and Human Services, said reports.
(Adapted from CNBC.com)