Q&A Roundtable: Our Experts Speak
Investors face a multitude of uncertainties: social unrest, COVID-19, recessionary economic data, a resurgent trade war, dismal corporate earnings projections…the litany of risks is a long one. Now’s a good time to tap the latest views from our analysts.
Below, I’ve cherry-picked compelling assertions from recent interview sessions with our experts. The names cited below only represent a small sampling of the talented advisors on the Investing Daily team.
Looking for the best possible investment advice? Let’s tap the collective brainpower of my colleagues. Bold copy represents my questions.
- Jim Pearce, chief investment strategist, Personal Finance.
How fast do you think the economy will recover?
I believe full economic recovery from the coronavirus pandemic will take much longer than the stock market’s recent behavior would suggest. In April, the unemployment rate soared to its highest level ever since it has been tracked going back to 1948. At the same time, economic productivity, as measured by gross domestic product (GDP), fell at its steepest rate since the depths of the Great Recession 11 years ago.
Watch This Video: The Economic Road From Here
Enormously disruptive macroeconomic events like this one have very long tails that drag on for years, sometimes decades, and are impossible to predict. I believe the stock’s market V-shaped recovery thus far is actually the first half of a W-shaped recovery. If so, another V-shaped pattern should emerge over the summer that could be just as severe as the first wave, especially if second quarter results are worse than feared.
- Nathan Slaughter, chief investment strategist, Takeover Trader and High-Yield Investing.
The stock market has partially bounced back from its March lows. Can stocks maintain momentum, or should investors remain wary of rallies until the coronavirus pandemic is vanquished?
We haven’t seen the last “head-fake.” That’s when stock prices make a move in one direction, but then reverse course and move in the opposite direction, like a boxer trying to fake out his opponent.
The COVID-19 pandemic has inflicted serious pain on the global economy. But I believe the wounds are superficial and will heal. In my opinion, the selloff was overdone. The major averages tumbled 40% in just 28 trading sessions. The speed and severity of that epic collapse are unparalleled in the annals of market history.
But I would argue this bounce-back rally has also gone too far, too fast. Granted, the market is a forward-looking mechanism and the $2 trillion stimulus package will provide a major economic jolt. What’s more, several states are taking baby steps to re-opening.
Read This Story: Investors Aren’t Out of The Woods Just Yet
Still, it’s hard to justify this level of optimism, at least until we get a better read on second quarter earnings. That being said, if you wait until the “all-clear” signal has been given, the most attractive discounts in the market today will be long gone.
- Stephen Leeb, chief investment strategist, The Complete Investor and Real World Investing.
March was a terrible month for the stock market, which plunged into bear territory before rebounding. Do you expect the bear to return this year?
One thing a unique event does is distort the utility of what normally are handy indicators. Will we make lower lows than we’ve made? I think you can make a good case that we won’t.
One factor is that horrible as the pandemic has been in many Western countries like Italy, Spain, and the U.S., Asia has been relatively unscathed. That suggests that many Asia-based companies, some of which we’ve been recommending, may do better than Western companies and provide support to the markets.
Still, in an integrated world without a broad-based recovery, all companies and the market as well will be affected.
It’s just really hard to predict. In the bear market of 2008-09, stocks after an initial recovery made several more bottoms before the bull took charge, so that could happen this time around.
- Amber Hestla, chief investment strategist, Income Trader, Profit Amplifier, Maximum Income, and Precision Pot Trader.
Do you expect a “V”-shaped economic recovery, one that’s “W”-shaped, or something altogether different?
It’s difficult to forecast the economy in detail, but like almost every other analyst, I believe we will see the deepest contraction in history this quarter. The Federal Reserve’s latest forecast is for a decline in U.S. GDP of 11.8% in the second quarter. Take a look at the chart.
That forecast is based on a model that is curve fitted to the last recession. Fed economists basically looked at the data from that recession and found the formula that had the best fit to the data.
Generally, curve fitting has its limits as a gauge, but this Fed estimate closely matches the Congressional Budget Office (CBO) forecast of an 11.8% contraction.
So a decline of 11.8% for the second quarter seems like a good estimate. CBO expects growth of 5.3% in the third quarter and then growth averaging 2.5% to 3% into the end of 2021.
I think the CBO is being too optimistic. That same forecast shows unemployment averaging 14% in the second quarter, peaking above 16% in the third quarter and averaging 10.1% for 2021.
Editor’s Note: In this “greatest hits” Q&A, I’ve only scratched the surface of our team’s expertise.
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John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com