Yahoo Finance Coronavirus fears may have created a buying opportunity in the stock market
Those longing for an attractive entry point into the bull market may have just found an opening, unfortunately due to an unspeakable human tragedy.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite have come well off their record highs hit in mid-January as China’s coronavirus rapidly spreads around the world. Investors have responded to the fears of the virus derailing global economic growth in the first of the year to take profits on stocks trading at lofty valuations.
But while the economic impact of the coronavirus remains unknown — and the short-term direction for stocks as a result in question — the longer term drivers of the market’s strong run in 2019 remain intact, pros say.
Some of those drivers include low interest rates from the Federal Reserve, a Fed that is still in the market buying bonds and boosting liquidity, solid U.S. consumer spending and a phase one trade deal between the U.S. and China.
“Obviously we are acting out of fear there will be a deceleration in economic activity so the market is adjusting. This was supposed to be a year of stabilizing growth and better policy globally, so this is a bit of disruption,” Invesco global markets strategist Brian Levitt said on Yahoo Finance’s The First Trade. “Ultimately I think we will find our way through this as we have with past breakouts of infectious diseases. You end up losing some economic activity in the near-term only to gain in the future. So I wouldn’t overreact to it.”
Portfolio manager Michael Lee agrees.
“A lot of this is fear-based selling,” Lee said. “So whenever you have fear of missing out to the upside or the fear to the downside, those are opportunities to make trades. I definitely think this is a buying opportunity for now. For me to get scared of this market and think this will have any meaningful impact, you will need to see the deaths [from coronavirus] increase exponentially.’
To that end, the latest earnings season should remind investors as to the ongoing strength for many global businesses. Sure they may suffer a near-term hit from the coronavirus, but the fundamentals look supportive of companies rebounding nicely mid-year. Just take a gander at the blowout quarters this week from Apple and Microsoft. Even the long-troubled General Electric showed some life in its business exiting 2019 as the industrial economy bounced back a bit.
Earnings are beating by 5.1%, with 58% of companies exceeding their bottom-line estimates, points out Credit Suisse. Not bad, all things considered.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Read the latest financial and business news from Yahoo Finance
Microsoft CEO Satya Nadella on the future of retail
4 major concerns investors have about the stock market in 2020
Trump's tax plan will hurt restaurants again in 2020: Dunkin' chair
Watch: Target is Yahoo Finance’s ‘Company of the Year’
Beyond Meat founder: things are going very well with McDonald’s
Starbucks CEO on what China has in store for the coffee giant
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.
