Stocks are sinking.
The major averages turned lower midday Thursday as rekindled concerns over the coronavirus's economic impact kept a lid on the U.S. market.
As Wall Street weighs the risks still facing stocks, here's what three market watchers predict will come next:
Barry Knapp, managing partner at Ironsides Macroeconomics, laid out his strategy for the second half of 2020:
"It's still early in the business cycle. We've been saying that all along. March 23 was the start of a new business cycle from an investor perspective, so, I wouldn't make the switch from cyclical names to defensive names, but I would raise some cash levels here and look for a bit of weakness to redeploy that cash for a year-end rally. That's how I would tactically think about the next few months."
Mike Thompson, lead portfolio manager at Goldman Sachs Asset Management, said it's likely things turn up from here for U.S. stocks:
"If you remember anything from this quarter … it's about [being] less bad. That's the way I think the portfolio management team is looking at it. [For] the S&P, this is going to be the worst quarter. And … at earnings of $22 plus for this quarter itself on the S&P, that's equivalent to what we saw in the second quarter of June of 2010. … Your two best performers in terms of growth are going to be likely the utilities, which we'll expect to be down 2%, and technology, down 9%."
Mohamed El-Erian, chief economic advisor at Allianz, said only three things could threaten the market's technical strength:
"The market has been telling you something that's really important. Technicals are really strong, which means to reverse it, you need a very big shock. I look at three possible – I want to say these are possible, these are risks to the scenario – sources of shocks. One is cumulative bankruptcies, because capital impairments hurt investors. Two is a big policy mistake. We don't renew some of the relief measures, for example. And the third one is just a market accident of some sort, that people find out that they've stretched themselves too far. Those are the three possible sources, but I stress: These market technicals are so strong that you would need a major hit from one of them or more to derail this mentality. You know, some of us are on the sidelines no longer really understanding what's driving these names higher. The themes, we think, have played out. But you've got to respect these market technicals."
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