Dennis Gartman Warns Against Buying the Dip in Stock Market

(Bloomberg) -- Stocks are bouncing back from their worst sell-off since December 2018, but economist Dennis Gartman is warning that this is not a dip worth buying.

Equities are “egregiously” over-d relative to measures such as sales, profits and the size of the economy, according to Gartman, who last year ended his daily newsletter after three decades. The spread of the coronavirus is threatening global growth, and investors should buy safety assets such as gold and government bonds, he said.

“I’m afraid rallies are to be sold into, not weakness to be bought,” Gartman said in an interview on Bloomberg Radio with John Tucker. “I’m amused or dismayed at how many people are still willing to buy the dip, and this dip is far more serious than people want to anticipate at this point.”

Listen here: Dennis Gartman Warns against Buying the Dip (Radio)

The S&P 500 was up 0.4% at 12:22 p.m. in New York, trading well off its earlier highs as U.S. and German officials warned that the coronavirus outbreak is on track to become a pandemic. The index slumped 7.6% in the prior four trading days, its biggest retreat since late 2018, as cases climbed in countries from South Korea to Italy and Iran.

Gartman’s view echoes that of Mohamed A. El-Erian, a Bloomberg Opinion columnist who wrote on Tuesday that the virus-induced sell-off “isn’t a buy-the-dip opportunity” because there’s little evidence right now supporting the notion of a V-shaped recovery.

Nouriel Roubini, chairman at Roubini Macro Associates and a professor at New York University’s Stern School of Business, is also a skeptic. In an interview on Bloomberg Television with Jonathan Ferro, he called hopes for a quick rebound in China’s economy “delusional.”

Growth in China, the center of the virus outbreak, will reach 4% at best this year, down from about 6% in 2019, Roubini estimates. While he expects the Federal Reserve to cut interest rates in March, he doesn’t think that kind of stimulus will be able to fix the negative supply shock dealt by the virus.

“People, when they talk about V-shape, they don’t know what they’re talking about,” Roubini said.

With the economic uncertainty hanging over financial markets, investors should go defensive, according to Gartman.

“You want to be long the gold market, short the stock market, and long the bond market,” he said. “That’s the trade to have. I have that in my own account and continue to recommend it.”

©2020 Bloomberg L.P.