Stocks are ‘on fire’ – but a second coronavirus wave isn’t priced in

essential workers second wave Lamborghin, Coronavirus, COVID19, FacemasksLamborghini upholstery workers producing surgical masks for S. Orsola Hospital With permission from TheNewsMarket

U.S. stock markets might be ‘on fire’ as earnings season begins – but Wall Street has not priced in a second wave of coronavirus, warns the CEO of one of the world’s largest independent financial advisory organizations.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2020 hedge fund letters, conferences and more

The warning from deVere Group’s chief executive Nigel Green comes as the S&P 500 gained over 2 per cent in early trading, following gains in European and the Asia-Pacific markets.

Mr Green notes: “This week, with earnings season underway, we are going to see just the beginning of how corporate America and Europe have been hit by the coronavirus pandemic. The results are likely to be dismal and forecasts for the rest of the year can be expected to be revised down.

“However, investors are overlooking this. Instead, they are clinging on to relatively positive economic news from China, hints that some major lockdowns in Europe and elsewhere are being eased, and that confirmed cases are falling –meaning economic activity can be revived.”

He continues: “It’s truly astonishing that as global economic growth forecasts are looking bleak and most countries are battling potentially one of the worst downturns in a generation, the markets are on fire and trading as though these are normal times.

Second wave could be worse

“They are not normal times. We are in unchartered waters. This isn’t the time to be complacent as I doubt the bear market is over. We shouldn’t call the bottom yet.

“It would appear that the financial markets are oblivious to the obvious and serious financial threat of a potential second wave of the coronavirus.  Alarmingly, this does not seem to have been priced in.”

Mr Green goes on to add: “The markets’ bullish sentiment during this mass disruption and dislocation would be baffling enough, but there are also other headwinds on the horizon.”

These, he notes, include the U.S. Presidential election, the threat of a no-deal Brexit, and the longer-term inflation risks.

The deVere CEO observes: “We can expect markets to remain volatile in the short-term."

“Many savvy investors will be riding the wave of volatility to build up their portfolios through lower entry points and seeking value and decent returns in order to grow their wealth. Why? Because history teaches us that over the longer-term the performance of stock markets is fairly predictable: they go up.”

Nigel Green concludes: “The markets are growing more positive about the Covid-19 crisis.

“But to sidestep taking a potentially massive hit, investors must avoid complacency and emotional decisions through solid financial strategies.”

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)






About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

Be the first to comment on "Stocks are ‘on fire’ – but a second coronavirus wave isn’t priced in"

Leave a comment