So the last couple weeks have been a bit of a white-knuckled panic as we seemingly race to the bottom. With the S&P 500 futures market activating limit-down circuit breaker protections after losing 7%, it's easy to start thinking disaster is on the horizon. Yet recent reports from a range of market analysts and strategists alike are suggesting that a turnaround may be coming up. Or not. The consensus view, meanwhile, seems to be that there really isn't much of a consensus about whether or not there's a turnaround coming, or if we still have farther to fall.
A Foundational Look at the Numbers
Thanks to the ongoing issues with the COVID-19 coronavirus, the market has been left reeling from selloffs on a grand scale. By itself, the Dow Jones Industrial Average is down just over 12% since its last record high of February 12, and this was a market that was generating record highs in rapid succession. Both the NASDAQ and the S&P 500 are down similarly—actually almost the same, to within a couple decimal points of each other—and several market assets are also declining. Crude oil, cryptocurrencies, and several others are feeling a decline.
More traditionally safe-haven assets, meanwhile, are enjoying a renaissance, as bond yields are looking at lows not seen in years. Gold recently saw its biggest one-week move in almost a decade—since 2011—though silver has been under unusual pressure by comparison.
So Here's the Good News
Armed with some background on the market's recent performance, we can take a look at what popular sentiment is gathering around the market from various analysts and strategists. Outcomes are proving, not surprisingly, somewhat mixed. Out of nine analysts consulted in a recent Marketwatch study, five had good things to say about the current market, three not so much, and one remaining a bit noncommittal.
The positive feedback started off with B. of A. Securities strategists who noted that—once the panic finally died off—there was room for “huge rotation to growth stocks and bond proxies” to kick in. The Sevens Report noted that, currently, the S&P 500 was trading at 17 times estimated earnings for 2020, down from just under 20 times just two weeks ago. This was too much pessimism for the Sevens Report, and though it thinks some panic is still in play, but in a few weeks, or possibly a few months, recovery should kick in.
BCA Research noted that the fundamentals supported bullishness, but the short term was likely to be hairy for some time. Jefferies Equities took a look at the S&P's ups and downs since 1990 and found that a “three-month horizon” commonly proved positive for the market. Lastly, Direxion noted that once large numbers of investors turn bearish, market opportunities are commonly missed, and “a large number of investors turning bearish” is a pretty fair summary of the market right now.
And Here's the Bad News
Naturally, the good news didn't rule the day unchallenged. Newfound Research declared attempts to find buys today “market timing,” which needed to be recognized. UBS couldn't find a reason to declare that a support level had been reached based on numbers from the Cboe Volatility Index, more commonly, the VIX. Mark Newton found a lack of “conviction” in current market moves, and thus wasn't interested in jumping back in. Throw in worrying drops in the Dow Jones Transportation Average and the potential for the continued decline was significant.
So What's the Path Going Forward?
Just to round it out, AxiCorp, via its chief market strategies Stephen Innes, suggested that impact duration from an event like this should take three weeks to bottom out and three weeks to recover, suggesting that we could get within striking distance of normal before the first flowers of May appeared.
For those who are thinking, that's almost half the year gone, that's a pretty reasonable picture of the market thus far. So the consensus here is that there really isn't much of a consensus. You'll find bulls and bears slugging it out for ideological supremacy all up and down the dial.
While the increased awareness around coronavirus, coupled with its comparatively low mortality rates outside of China, do suggest that better times are ahead—don't forget summer is coming, and diseases tend to retract when met with increased heat, daylight, and opportunities for fresh air—just when those better times actually show up depend on a range of factors that can't be readily predicted. Just ask the nine analysts from the Marketwatch report.7 Tech Stocks That Will Avoid Government Regulation
As if investing in the tech sector did not carry enough risk, there’s a new threat to the tech part of your portfolio. There is a growing sense that the United States Congress will seek to regulate some of the largest tech companies.
At this point, it looks like several of the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Alphabet/Google) may be the initial targets. Some regulation, particularly regarding data security and privacy – not to mention censorship - would be welcome. But we all know it’s not likely to stop there.
What will more extreme regulation look like? If the most vocal members of Congress hold sway, some of these companies may get broken up or face utility-like regulation. From an investment standpoint, it just adds uncertainty.
The good news is that the tech sector encompasses many companies that are likely to avoid government regulation. With areas like cybersecurity, support for remote work, and mobile gaming to continue to pick up steam, there are other areas that can help boost your portfolio.
And in this special presentation, we’ll give you seven of our picks for tech stocks that will avoid government regulation.
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