Despite global fears about the economic impact of the coronavirus, some strategists say that savvy investors should prepare to profit once the outbreak subsides.
The coronavirus is likely to reduce economic growth in the first quarter by 2 percentage points globally and 0.4-0.5 points in the U.S., according to Goldman Sachs strategists.
Global equities have been in turmoil amid fears about the spread of the deadly coronavirus. The death toll from the outbreak has climbed above 1,000, with cases still being confirmed globally and steps being take to contain it continuing apace. Flights are still being canceled, economic warnings remain bleak and companies are pulling out of events for employee safety.
Yet, stock markets are still hovering around record levels and a risk-on feel pervaded Asian stocks, which rose on Tuesday as investors try to decipher whether the outbreak is stabilizing.
But Goldman predicts that nearly all of that economic activity will be made up in the second and third quarters, so that there’s barely any net economic impact from the disease, Barron's explained.
"Still, the strategists don’t think investors should buy every stock that’s fallen in the hope that the virus will be contained. People should look in particular at cyclical and value stocks, they say," Barron's reported.
"Companies that are growing their dividends have been trailing the market and could rebound on expectations that virus-related declines could reverse," Barron's explained.
Stocks with growing dividends that are likely to swing on market shifts include Skyworks (SWKS), DXC Technology (DXC), Wynn Resorts (WYNN), Broadcom (AVGO), and Caterpillar (CAT).
Other respected investment voices share such optimism that the virus outbreak will soon subside with little permanent global economic dmagae.
Ray Dalio says the impact of the coronavirus outbreak on markets has been exaggerated and is likely to be short lived.
Investor concerns over the pandemic “probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that, so I would expect more of a rebound,” Dalio, the billionaire founder of Bridgewater Associates, said at a conference in Abu Dhabi on Tuesday.
“It most likely will be something that in another year or two will be well beyond what everyone will be talking about,” Bloomberg News quoted Dalio as saying.
As manager of the world’s biggest hedge fund, Dalio should know what he’s talking about. Bridgewater has made $58.5 billion for its clients since its beginning in 1975, the most by any hedge fund, according to estimates by LCH Investments, although last year its main fund suffered its first loss since 2000.
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