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These Three Things Need to Happen Before Stocks Bottom Out, Credit Suisse Says

By Callum KeownUpdated March 16, 2020 10:29 am ET / Original March 16, 2020 9:58 am ET

When will stocks reach the low and what will the recovery look like?

Workers wearing protective gear in South Korea.ASSOCIATED PRESS
Workers wearing protective gear in South Korea.ASSOCIATED PRESS

Credit Suisse said it needed to see three conditions required for a trough in global stocks:

1. Clear-cut fiscal easing in the U.S. — which happened late on Sunday;

2. A peak in daily infection rates

3. A trough in global purchasing managers indexes, which it said could happen in May.

In the severe acute respiratory syndrome crisis, markets bottomed out a week daily new infections hit a peak, the bank’s research analysts said.

“We expect a V-shaped recovery ultimately and would be buyers of equities on a one-year view; we believe markets will rise 15-20% over the next 12 months. 

“Historically when we look at exogenous supply-side shocks, markets tend to rise very rapidly from the trough (SARS, Kobe earthquake, Suez, 1987),” they said.

The analysts, led by Andrew Garthwaite, favored stocks in Asia (a commodity-importing region on top of the virus) relative to Europe. In a new realistic worst-case scenario, U.S. earnings would drop 20% and the S&P 500 would fall to 2,200 points, they added.

They also expected “massive” monetary and fiscal stimulus. “This should enable a V-shaped recovery that by the end of 2021 could make up for much of 2020’s lost growth,” they said.

Source: https://www.barrons.com/articles/these-three-things-need-to-happen-before-stocks-bottom-out-credit-suisse-says-51584367103

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