Dip Buyers Have Another Chance This Quarter, T. Rowe Price Says
Dip Buyers Have Another Chance This Quarter, T. Rowe Price Says
(Bloomberg) -- The message from T. Rowe Price’s multi-asset division is clear: The global economy will worsen, market anxiety will be back, and bargain hunters will have their chance again.
The recent equity rebound may be short lived, said Thomas Poullaouec, the firm’s head of multi-asset solutions for Asia Pacific. The market has yet to fully factor in the magnitude of the pandemic impact, as forecasts for corporate earnings will fall more in a deteriorating economy, he said.
The rebound of almost 20% in the MSCI All-Country World Index did little to convince some investors that the worst is behind. Pictet Wealth Management said Tuesday the “real capitulation” has yet to take place, echoing earlier comments by Goldman Sachs Group Inc. that investors may be getting too optimistic, partly because of the coronavirus’ larger-than-expected disruption in businesses and economies.
“Volatility will remain relatively elevated throughout the second quarter,” said Poullaouec, whose team oversaw $360 billion of assets globally as of Dec. 31. “We will have economic data and earnings releases, which in some cases could be the worst we have ever seen in our lifetime. There will be a lot of pain going ahead.”
To him, a potential retreat in stocks will offer buy-the-dip opportunities for participants with an investment horizon of more than a year. He anticipates global equities will trade higher in 12 months despite near-term swings, as market confidence will eventually come back with progress in containing the virus contagion.
The team took some profit from long-term U.S. Treasuries to add “modestly” to riskier assets from the end of February throughout March. A further pull-back “will be an opportunity to get back in again to smooth out our entry points,” Poullaouec said.
The division bought shares of developed markets such as Japan during the March sell-off. It also added high-yield bonds as the wide spread to Treasuries presented a “once-in-a-decade opportunity,” he said.
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