Undoubtedly, the coronavirus outbreak has been putting stock market investors on a free fall rollercoaster, but it looks like the drop could be coming to a close, according to Bank of America’s Chief Investment Strategist Michael Hartnett.
Investors are well aware of the pain in the markets with one glance at their 401(k) retirement accounts, and for fixed income investors, that same pain is felt in the lack of yield. Per a CNBC report, more “than $20 trillion in U.S. stocks value was wiped out during the pandemic-induced sell-off, and investment-grade credit spreads have widened to 400 basis points from 100 basis points,” according to Hartnett.
However, the enormity of the pullback in the stock and bond market is evidence that a bottom level has been reached.
“Tough for asset prices & volatility to subside until human beings can safely leave their homes; that said … lows on corporate bond & stock prices are in,” wrote Hartnett.
Within the past month, there’s been a record of $284 billion in outflows from bonds in addition to $658 billion heading into cash. All in all, the outflow from stock and bonds could be dipping into oversold territory, meaning that a bounce is looming.
The question now is how optimistic is Bank of America on the size of the bounce? Not very—the CNBC report also noted that BofA “cut its year-end target on the S&P 500 to 2,600 from 3,100, which would translate into a nearly 20% loss for the full-year 2020 and is only about 4.5% higher from current levels. The new outlook represents the most bearish view on Wall Street, according to the CNBC Market Strategist Survey that rounds up 16 top strategists’ forecasts. “
Nonetheless, bullish investors will take any dose of good news at this point. If a market comeback is ahead, this creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).
- Seeks investment results, before fees and expenses, that track the Russell 1000®/FTSE All-World ex-US 150/50 Net Spread Index (the “index”).
- The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of ETFs on the Long Component of the index.
- The index measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Index (the “Long Component”) and 50% short exposure to the FTSE All-World ex-US Index (the “Short Component”).
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