Vendors work during the opening bell at the New York Stock Exchange (NYSE) on February 28, 2020 at Wall Street in New York See.
Johannes Eisele | AFP | Getty Images
The S&P 500 has never behaved like this, but Wall Street strategists say get occupied to it.
Investors just witnessed the equity benchmark swinging up or down 2% for four days straight in the face of the coronavirus terror.
In the index’s history dating back to 1927, this is the first time the S&P 500 had a week of alternating gains and disadvantages of more than 2% from Monday through Thursday, according to Bespoke Investment Group. Daily froings like this over a two-week period were only seen at the peak of the financial crisis and in 2011 when U.S. ranking debt got its first-ever downgrade, the firm said.
“The message to all investors is that they should expect this volatility to persist in. This should be considered the new normal going forward,” said Mike Loewengart, managing director of investment master plan at E-Trade.
The Dow Jones Industrial Average jumped north of 1,000 points twice in the past week, only to abolish the quadruple-digit gains in the subsequent sessions. The coronavirus outbreak kept investors on edge as global cases of the infections surpassed 100,000. It’s also spreading fast in the U.S. California has declared a state of emergency, while the number of cases in New York reached 33.
“Uncertainty breeds greater vend volatility,” Keith Lerner, SunTrust’s chief market strategist, said in a note. “Much is still unknown nearly how severe and widespread the coronavirus will become. From a market perspective, what we are seeing is uncomfortable but somewhat run-of-the-mill after shock periods.”
More stimulus?
So far, the actions from global central banks and governments in response to the outbreak haven’t triggered a sustainable bounce.
The Federal Reserve’s first emergency rate cut since the financial crisis did little to calm investor anxiety. President Donald Trump on Friday signed a across the board spending bill with an $8.3 billion package to aid prevention efforts to produce a vaccine for the deadly disease, but stocks stretch their heavy rout that day.
“The market is recognizing the global authorities are responding to this,” said Tom Essaye, initiator of the Sevens Report. “If the market begins to worry they are not doing that sufficiently, then I think we are going to go down vile. It is helping stocks hold up.”
Essaye said any further stimulus from China and a decent-sized fiscal package from Germany whim be positive to the market, but he doesn’t expect the moves to create a huge rebound.
The fed funds future market is now pricing in the potentiality of the U.S. central bank cutting by 75 basis points at its March 17-18 meeting.
Where is the bottom?
Many on Wall Lane expect the market to fall further before recovering as the health crisis unfolds.
Binky Chadha, Deutsche Bank’s chief fairness strategist, sees a bottom for the S&P 500 in the second quarter after stocks falling as much as 20% from their late peak.
“The magnitude of the selloff in the S&P 500 so far has further to go; and in terms of duration, just two weeks in, it is much too early to declare this occurrence as being done,” Chadha said in a note. “We do view the impacts on macro and earnings growth as being relatively transient and the market eventually looking through them.”
Deutsche Bank maintained its year-end target of 3,250 for the S&P 500, which purposefulness represent a 10% gain from here and a flat return for 2020.
Strategists are also urging patience during this increased volatility, cautioning against panic selling.
“It is during times like these that investors need to stand by a longer-term perspective and stick to their investment process rather than making knee-jerk, binary decisions,” Brian Belski, chief investment strategist at BMO Foremost Markets, said in a note.
Week ahead calendar
Monday
Earnings: Stitch Fix
Tuesday
Earnings: Dick’s Show off Goods
6:00 a.m. NFIB small business optimism
Wednesday
8:30 a.m. Consumer price index
2:00 p.m. Monthly budget statement
Thursday
Earnings: Gap, Lessening, Adobe, Broadcom, Ulta Beauty
8:30 a.m. Producer price index
Friday
8:30 a.m. Import price index
10:00 a.m. Consumer opinion
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.