RE: RE: Financial Times11 Apr 2020 17:16
CONTINUED....
Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/cb31917c-fc08-487a-af0d-f9e54c8717dd
Deep pullbacks are, after all, a common feature of markets in the immediate aftermath of abrupt crises, as was evident in 2001, 2008, and even back to the great US stock market crash of 1929 and the subsequent Great Depression. US stocks did not reclaim their 1929 highs until 1958. Some analysts therefore reckon that the rally since late March is what is often dubbed a “bear market trap”.
Robert Buckland, chief global equity strategist at Citi, points out that a decent rule of thumb is that stock markets fall roughly as much as corporate earnings do. The depth and extent of the global recession indicates that profits should halve this year — but the FTSE All-World index is now back within 20 per cent of its peak.
Fund managers must try to balance the huge scale of central banks’ support — underlined again on Thursday when the Fed announced yet another big support package to the tune of $2.3tn — against economies in deep distress, as seen in a record-breaking acceleration in US job losses.
Not everyone is convinced the stimulus is enough. Bank of America analysts note that US equities have never taken less than six months to find their bottom, once they have tumbled 30 per cent and the economy is in a recession. They therefore predict that markets have further to fall.
“While those banking on a rapid equity market recovery are [expecting] unprecedented stimulus to erase the pain, history would also suggest they may be banking on a miracle,” they wrote in a recent report.
Signs that the coronavirus spread is slowing is not necessarily enough, either. Some analysts point out that while some countries — such as Norway, Denmark, the Czech Republic and Austria — have recently announced plans to gradually end their lockdowns, the economic damage is likely to linger.
Howard Marks, the 73-year-old billionaire founder of Oaktree Capital Management famed for his knack for scooping up bargains at times of economic distress, said in a note this week that with the course of the virus so difficult to predict, and its effects so sprawling, investors should be willing to admit that they simply do not know what happens next.
That is a tough task for a profession that prides itself on making predictions and anticipating their market impact, but “no one can tell you this is the time to buy”, he wrote. “Nobody knows.”
Nonetheless, Mr Marks said that extreme caution was now no longer warranted, given drops in asset prices and the wave of central bank support that has neutralised some systemic ri
Sign In
Follow the stocks
