After the worst week on Wall Street since 2008, investors are waking up to the all-too-familiar news of more coronavirus cases worldwide, and falling global stocks. The second U.S. death from the virus was reported on Sunday. Asian and European stocks started Monday positively — as central banks around the world sparked hopes of interest-rate cuts. But they moved into the red after an OECD report warned that the virus economic impact was “severe” and putting “the world economy at risk.” U.S. futures followed suit on a volatile morning.
The scale and ultimate impact of the outbreak remains unknown but, in our call of the day, Bernstein analysts said it was not time for investors to sit on the fence.
“The impact that the virus outbreak will have on growth is, at the moment, unknown. But after such an abrupt move, as we saw at the end of last week from a sell-side strategy perspective, one cannot sit on the fence,” analysts led by Inigo Fraser-Jenkins said in a note.
“Do we believe our tactical models or not? We do, and they are suggesting that investor sentiment has simply moved too far. ... So we are advocating tactically increasing equity exposure.”
The analysts said the full impact of the epidemic would be unknown for some time, and made a short-term tactical call to buy global stocks.
They added that this was not a “strategic call on the impact of the outbreak” and that it may be necessary to adjust equity exposure downwards again if the virus causes a recession, while fiscal policy responses could also lead to changes.
“But in the meantime before we have good data on the full macro significance, over tactical horizons of [one to two] months, we think it is right to buy the global equity market in response to last week’s fall,” they added.
This article originally appeared on MarketWatch.
