{"id":165599,"date":"2020-02-27T07:16:29","date_gmt":"2020-02-27T12:16:29","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=165599"},"modified":"2020-02-27T07:16:29","modified_gmt":"2020-02-27T12:16:29","slug":"the-worst-is-yet-to-come","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/the-worst-is-yet-to-come\/","title":{"rendered":"The worst is yet to come!"},"content":{"rendered":"
February 27, 2020<\/div>
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By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime<\/a><\/strong><\/p>\n

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Buying the dips has been a very successful strategy over the past several years when it comes to equity trading. Even the US National Economic Council Director, Larry Kudlow is providing this advice to long-term investors. After the Dow Jones Industrial Average Index plunged 2600 points or 8.8% from its record high, Kudlow sees it as a good opportunity to buy cheap stocks.<\/p>\n

Indeed, stocks are cheap, but cheap is a relative term. They may be cheaper than two weeks ago, but when compared to historical averages or relative to foreign stocks, they are still way too expensive.<\/p>\n

Higher valuations are justified when there is no better alternative to stocks. That\u2019s especially the case when US 10-year bonds are providing a 1.2% yield and most European government bond yields are in negative territory. However, when recession fears begin to play out, investors will no longer look at valuation metrics as all they want to do is preserve their capital.<\/p>\n

Today\u2019s coronavirus can be compared to a global natural disaster.\u00a0 Global supply chains are facing their toughest challenges, corporates have already issued profit warnings, capex will likely evaporate, many employees are working from home while some are on unpaid leave, businesses will begin to default on their obligations unable to pay their workers and confidence will continue to deteriorate. So, it\u2019s not just the supply side that is impacted by the coronavirus, it\u2019s also the demand side.<\/p>\n

Buying the dips may pay off if coronavirus gets under control, especially because we\u2019ll end up with more liquidity in the market. The problem here is no one knows when will it take a U-turn, especially as the outbreak appears to have entered a new stage of contagion, after World Health Organization officials said the number of daily cases reported outside China has now exceeded the number of cases within the country of origin.<\/p>\n

Unfortunately, it\u2019s becoming more likely we are heading into a global pandemic, and that is not yet priced into markets. Fiscal and monetary policies may do their best, and I wouldn\u2019t be surprised to see the money helicopter expand beyond Hong Kong, Macau and Singapore. But their impact won\u2019t be strong enough to restore investor\u2019s confidence.<\/p>\n

US equity futures are indicating a high possibility of entering correction territory when markets open up later today, that is a 10% or more decline from the latest peak, but given where we stand currently, a bear market or a 20% decline from this month\u2019s record high is becoming a highly likely scenario.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Disclaimer: <\/strong>The content in this article comprises personal opinions and should not be construed as containing personal and\/or other investment advice and\/or an offer of and\/or solicitation for any transactions in financial instruments and\/or a guarantee and\/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.<\/em><\/p>\n<\/div>\n

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\"Forex-Time-Logo\"Article by ForexTime<\/a><\/span><\/strong><\/p>\n

ForexTime Ltd (FXTM)<\/strong> is an award winning international online forex broker regulated by CySEC 185\/12 www.forextime.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime Buying the dips has been a very successful strategy over the past several years when it comes to equity trading. Even the US National Economic Council Director, Larry Kudlow is providing this advice to long-term investors. After the Dow Jones Industrial Average Index plunged 2600 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-165599","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=165599"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165599\/revisions"}],"predecessor-version":[{"id":165601,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165599\/revisions\/165601"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=165599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=165599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=165599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}