Investors are struggling in a panic stemming from the uncertainty caused by the coronavirus to the global economy. The closure in many countries, including the world's largest economies, has had a heavy impact on economic activities. It overshadows the efforts of policymakers in reducing the impact of the disease on economies. Volatility is expected to continue at a high level, leading to the gloomy shadow covering the views of investors and strategists.
That's the view of Nadine Terman, CEO of Solstein Capital LLC. "When VIX is over 31, we cannot invest. The problem is even more serious when the “safe havens” like gold and Treasury Bond also go down, along with many other assets. People will have to be extremely careful." Terman said. At the moment, the so-called index of investors' fear has constantly been at the highest level since the 2008 financial crisis.
"In order for the market to recover in the long term, we believe that we need to see special policies that have not happened or existing policies that are more direct. We need to feel confident in the ability to control the disease. This seems still quite far-fetched. Everything could be a lot worse before it could get better, "said JPMorgan Chase & Co. strategists, including Mislav Matejka. According to Matejka, stocks have lost half their value in the last two recessions.
Currently, they have only lost 20% of the value. The last three recessions also have the P / E levels of 10.1, 13.8 and 10.2 times, respectively. Meanwhile, the current P / E is 15.2 times and 14.5 times in the last 2 consecutive bottoms. in the last 2 consecutive bottoms.
Jon Hill, a US yield strategist at BMO Capital Markets, argued that VIX closing above 80 is something that has only happened three times in history. In the last two times, VIX reached this peak in the fourth quarter of 2018. "Right now, we are in danger of a crisis. The future is almost unpredictable. However, continuing the market support dynamics is something that is foreseeable.”, Hill said.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said: "Governments have begun to announce fiscal policy, which is what the market is expecting. Their goal is to help businesses survive. However, to reassure the market in the absence of good information on virus control, we need more open commitments from governments to support businesses and individuals in dealing with cash flow problems arising from the outbreak of COVID-19 ".
From this week, published economic reports are likely to begin to reflect the negative impact of efforts to prevent COVID-19 from spreading. "There is no doubt that there will be bad news. However, at least investors have access to basic and mainstream information.
The fear of bad numbers often gets worse before they become a reality, "said Jim Paulsen, chief investment strategist at Leuthold Group. When this crisis started, many people believed it was only temporary. Economies can overcome the crisis when there is a consensus that the impact is only temporary and the economy will recover. Stock prices and bond yields will rise not only to reflect recovery but also to the effect of fear reversals.
Eleanor Creagh, a market strategist at Saxo Capital Markets, said: "It is still too early to say that the coronavirus health crisis will become a serious global crisis and, worse, an economic crisis, as well as to estimate its impact level.
However, confidence is weak while fear from uncertainty puts a range of assets under strong pressure. " According to Creagh, the market will need time to revalue. "People need to make the best plan for the worst," Creagh emphasized.
Altaf Kassam, Head of EMEA's Strategy & Investment Research Department at State Street Global Advisors, said that what triggered the panic was the speed and the extent of the sell-off. The more the virus spreads, the more the financial market will slide. The question now is whether what policymakers do can bring a positive signal to the market and whether they can do more.
Manishi Raychaudhuri, head of Asia-Pacific Securities Research at Hong Kong-based BNP Paribas SA, said: Investors in the world cannot imagine the most basic figures in the context of escalating disease. We are living in a highly uncertain environment ".
>> Money begins to return to stock, a series of stocks rebound