Analysts at JP Morgan Asset Management are of the opinion that it is too early to buy equities as the market remains vulnerable to negative developments in the coronavirus crisis, according to Bloomberg.
The S&P 500, Wall Street’s equity index and a benchmark for global stock markets, rose more than 10 percent last week, engulfing or erasing the preceding week’s slide, as the Federal Reserve announced an open-ended asset purchase program and the US Senate passed the unprecedented $2 trillion fiscal stimulus package to contain the economic fallout from the coronavirus outbreak.
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“I’m not yet confident in advocating overweight risk assets positions because you’re vulnerable in that scenario to a deterioration of the news on the medical front,” said Hugh Gimber, a global market strategist at JPMorgan Asset Management.
The policy measures have helped but they’re not on their own enough for us to call a definitive bottom in this market.
The full extent of damage to corporate profits remains unknown, making it dangerous to turn risk-on.
You want to be investing in companies that have the balance sheet flexibility to be able to handle this short-term hit to activity and come out on the other side the strongest.
The central banks will help solve the liquidity challenge for corporates, but they can’t help to solve the solvency issue for those more under-pressure names.
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