Following a sharp rise from March lows, The S&P 500 slumped 5.9 per cent on Thursday, its steepest one-session loss since March 16, after renewed fears of a new wave of coronavirus infections and gloomy economic forecasts from the US Federal Reserve. Prior to the fall, the S&P 500 had traded at 22 times expected earnings, its most expensive level since the dot-com boom. — AFP pic
“If you’re a longer-term investor, you still have to like your equities exposure more than fixed-income exposure, where you basically have no upside at this point and your earnings are your paltry yield,” said Troy Gayeski, Co-CIO of SkyBridge, an alternative investments firm. Jack Ablin, chief investment officer at Cresset Capital Management said he is not changing his mind on his decision to add riskier assets during the early days of the crisis.
Guggenheim Partners global chief investment officer Scott Minerd told CNBC on Thursday that stocks could retest their lows and that the S&P, which closed Thursday at just above 3,000, could nearly halve to 1,600. If the market rallies in coming days, he told CNBC that his biggest challenge will be whether to use the opportunity “to reduce exposure.”
Monica Erickson, investment grade credit portfolio manager at DoubleLine, said she had lightened up on particularly hard-hit sectors such as travel, energy and real estate investment trusts when equities were rallying and spreads tightening. Erickson said she has not changed positioning due to Thursday’s market drop.