How Veteran Global Investors Plan To Tide Over The Coronavirus Volatility

The outbreak disrupted the decade-long bull run in the U.S. with the S&P 500 tumbling 14 percent in the last seven trading sessions. Coordinated efforts by various central banks, however, helped soothe market sentiment.

While stocks in the U.S. bounced back more than 7 percent from their lows, China’s Shanghai Composite Index has witnessed almost a V-shaped recovery to the levels seen before the virus outbreak.

Here’s what veteran investors suggest as uncertainty looms:

Howard Marks—Co-founder Oaktree Capital Management

The stock market was overvalued two weeks ago. That means today, even with the short-term prospects of business somewhat diminished, it’s closer to fairly valued but not necessarily a giveaway. It’s okay to do some buying because things are cheaper but there is no logical argument to spending all your cash given that we have no idea how negative future events will be.

Ray Dalio—Founder, Bridgewater Associates

I will repeat my overarching perspective, which is that I don’t like to take bets on things that I don’t feel I have a big edge on, I don’t like to make any one bet really big, and I’d rather seek how to neutralise myself against big unknowns than how to bet on them. That applies to the coronavirus. Still, there’s no getting around having to figure out what this situation is likely to mean and how we should deal with it.

Russell Napier, Co-founder, Electronic Research Interchange

No investor can accurately forecast the impact of Covid-19 on the health of the world’s population or the global economy. It is clearly a shock to global economic activity. This shock is very deflationary due to near-record high debt levels, more importantly because this shock will lead to a major rise in financial repression. World debt-to-GDP is at 242 percent, just below a record high, and well above the 211 percent reached in 2007 at the peak of the last business cycle. The then record-high debt-to-GDP level in 2007 was a major reason why what started as a recession almost tipped into a depression.

Chris Wood, Global Head of Equity Strategy, Jefferies

The bigger risk for the markets is the presence of the virus in North America. From a financial market’s standpoint, the bet remains on the euro-dollar trade as a hedge instead of selling out of equities. On a base case, the virus could burnout as the season changes, and if it does, then the markets will rally and shift focus to the presidential race.