Expert on coronavirus market volatility: Not out of the woods yet

Director of Market Strategy at BNY Mellon Investment Management Liz Young joins Yahoo Finance’s Seana Smith to discuss the outlook on markets as coronavirus cases approach 1 million globally.

Video Transcript

- Welcome back to Yahoo Finance Live. We have stocks holding on to gains, at least, with the Dow up 150 points. Here with more on today's action, I want to bring in Liz Young of BNY Mellon. And Liz, lots to talk about out there just in terms of the recent action that we've seen coming off of the rally last week, the sell off that we saw yesterday. Do you think we're out of the woods yet at this point?

LIZ YOUNG: No, I don't think we're out of the woods yet. There's a couple different ways to look at this. So we've seen a pretty sharp draw down. And peak to trough, if we look at last Monday as one of the lower points, peak to trough, we've gone down 34% at certain points. And that's a pretty good draw down, so I think, in some cases, it's OK to start looking at opportunities.

However, we are certainly not out of the woods. We're here on April 2, and we're just now starting to get data that shows us some of the pain that the economy is going to feel. Now, the market hasn't reacted that poorly to the jobs data as of yet. But if some of this poor data persists past April, if we start to feel like this is going to last further into summer, I think the market is going to have quite a bit more downside from here.

- Liz, what levels are you looking at when trying to gauge the bottoming process?

LIZ YOUNG: So we don't make point forecasts in the market, per se, but, if you try to think about what's priced into the market right now, that's really what matters. And as far as we can tell, when it was pulling back pretty deeply a couple of weeks ago, the market was pricing in-- we talk about these letters all the time, but it was pricing in kind of an L-shaped unrecoverable, almost, or something that wasn't going to recover until very far off into the future, which we think was a little bit more pessimistic than necessary.

But you can also look at what it's pricing at as far as earnings go. And earnings estimates right now stay at about 0% growth. We think there's a chance that that comes down quite a bit. And the market, I think, is already ahead of that in saying that it knows earnings are going to come down. So it's more about the duration than the magnitude of numbers we're hearing today.

- And Liz, real quick, do you expect volatility to continue, or at least, for the foreseeable future?

LIZ YOUNG: I do expect it to continue for the foreseeable future, and I can say that with confidence for April. I do think, though, that liquidity is going to continue to be supported by the Fed, and some of those high quality corporates and some of the treasury markets and mortgage markets should trade a little more fluidly than they had in the past.

- All right, Liz Young with BNY Mellon. Thanks so much for taking the time to join us this afternoon.

LIZ YOUNG: Thank you.