The Selling Probably Isn’t Over; JP Morgan Revises China’s Q1 GDP Forecast To -4 Percent; Jeff Gundalach Says Market Pricing In A +50% Bernie Sanders Is Democratic Nominee For POTUS
What a difference 3 days make.+ $2T in stock prices/equity wealth has been wiped out of the U.S. stock market since Monday. As you might expect leisure travel has been especially hard hit, with the airlines and crusie ship companies taking a bath. American Airlines is down 17.11 percent, Norwegian Cruise Line down 16.33 percent, and Royal Caribbean down 15 percent. As you might expect, oil and the energy sector has also been hard hit, down 28 percent from its 52-week high.
Big-tech has not been immune and the following are examples of what has transpired the past two days: From their 52-week highs, Adobe is down 10.3 percent; Microsoft -11.9%; Apple -12.4%; Intel -14.1%, Oracle -15.8%; and CISCO -26.9 percent. Sisty two percent of the S&P 500 is in correction territory. So, there are bargains galore, if you are inclined to nibble. Me personally, I want to see what traders are doing tomorrow/Friday afternoon around 3:30 pm. It will be put up, or shut-up time for traders, 30 minutes prior to the weekend. Will traders not want to be long for the weekend? If so, expect more selling into the weekend. If not, time to nibble away, but not jump in all the way.
China’s economy, the second largest in the world at around $14T, has cratered. Joseph Lupton, JP Morgan Global Economist was interviewed on CNBC’s Squawk Box yesterday/Feb. 26, and he said that his firm had revised their GDP projection for China in Q1 of 2020 to -4 percent. Mr. Lupton noted that during the 2003 SARS oubreak, China’s GDP went from 9-10 percent pre-SARS, to just 1 percent during the outbreak. So, if China was at around 6-7 percent pre-Coronavirus, then you get to the -4 percent figure. Assuming the virus peaks and subsides, JP Morgan is forecasting a sharp rebound to 15 percent in the second quarter — due to pent up demand and stimulus spending by the Chinese government.
China’s economic contraction is hitting Europe hard, as the EU Chamber of Commerce reported this morning (Feb.27), that they “48 percent of Europe’s business leaders see a drop in 2020 China revenue, if business on the mainland remains abnormally low through April 30. Eighteen percent see a drop in China revenue of greater than 50 percent, if business on the mainland remains abnormally low till August 30. Forty-six percent of Europe’s multinational companies are lowering their revenue from China for the remainder of 2020.” Goldman Sachs is out with a note this morning that if the coronavirus does become widespread in the U.S., they warn there may be no U.S. growth in 2020.
David Bianco, DWS Group CIO, Americas, also interviewed on Squawk Box yesterday, warned investors that the U.S. stock market is in danger of a further drop in prices as S&P earnings is now in danger. Mr. Bianco believes we’re in for a full-blown correction and more selling is likely. Jeff Gundalach of DoubleLine Capital attributes some of the selling to a potential Bernie Sanders Democratic nomination.
Regrding the virus itself, Michael Osterholm, the Director of the Center for Infectious Disease Research, and Policy at the University of Minnesota, and a world renowned virologist, was interviewed on CNBC’s Squawk Box this mornin. agnd said he belives that the coronavirus is likely widespread across the U.S. and we simply do not know because we do not have the adequate testing infrastructure that would provide reliable information. Cross your fingers, stay well, and know that this too shall pass in the coming months. A vaccine could be available by this fall. RCP, fortunascorner.com