Another market plunge imminent?

[Goatee Joe]

Somewhat clickbait-ish headline here, but hot take from a fund manager that we may have a long ways to go until this stock market hits bottom.  And the S&P could tank again, falling to 1,500.  Opinions on this one?  Are we teetering on the edge of another precipitous drop?

https://www.marketwatch.com/story/wall-street-star-money-manager-says-sp-500-could-plunge-to-1500-in-worst-case-with-coronavirus-fallout-lingering-for-years-2020-04-05?mod=investing

[pressure9pa]

Interesting, but note the fund manager never predicts S&P = 1,500.  He only predicts quarterly earnings to fall so low that traditional valuations would put the S&P at 1,500.  That's a big difference, because the market should trade on the expectations of long term earnings.  Thus the 1,500 seems unreachable.  Note that is not to say that another large drop is impossible, but the headline is misleading at best. 

[zolotiyeruki]

It sounds like the 1500 mark is only possible if 1) investors start expecting lower P/E ratios AND 2) investors accept (hopefully temporarily) depressed revenue numbers as permanent.

Given the behavior of the stock market over the last few years, I don't think either of those assumptions is reliable.

[J.R. Ewing]

I don't know about a plunge, but I think people are getting overconfident about the world returning to work soon.  Even after deaths peak and diminish, there is still a ton of Covid positive people out there shedding virus. 

[KBecks]

I think it depends on the next two weeks or so.  Today the market is up, or it was up when I checked a few hours ago.  But we will have to see how it goes in the hot spots and overall.  If things improve, and if some of the new treatments are working, or if there is any big developments on a vaccine, then we may start to get back to work and get the economy moving again.

[scottish]

I expect that there'll be another plunge if social distancing doesn't work well and infection rates continue to grow geometrically.    I don't expect this enough to change my contribution strategy though.

[Paper Chaser]

I think it's likely to drop again, but it's now gained 20% since it bottomed on 3-23 so... The duration of this shutdown is likely to be the big factor. New people are still being laid off, let go or having their pay cut. Businesses and individuals alike with little savings are starting to really feel the squeeze and that's likely to get worse in the next 2-3 weeks until stimulus money starts hitting accounts. Even from that point, spending on any non-essential (businesses and individuals alike) is likely to be very blunted. Q2 is looking more and more like a waste. If it stretches for nearly all of Q2, or into Q3 then things will be really dire and I'd expect more selling.

As always, the real question here is how could we take action? And to really answer that we'd need to know how much it might drop and when.

[zolotiyeruki]

I dunno.  NYC's death rate has leveled off, and hospitalization is actually trending downward.

That suggests that the current measures are working, or that the virus has already worked itself through the bulk of the population, or some combination of the two.

[BlueMR2]

I'm not expecting a big plunge.  Could always happen of course, but I'm anticipating a period of floating up with some little drops again before a real recovery starts.

[Brother Esau]

Maybe but so what? Let's see where we are in 3, 5, 10 years from now.

[Acastus]

I think the light bulb moment is when every company has a bad quarter over the next 3 weeks. Some people may realize the 1st quarter is actually our best quarter of the year, and Q2 will be really, amazingly horrible. Who knows when the light bulb goes on. Most investors are not thinking even 4 months in advance.

I also think we will see many false starts as different countries and states try to go back to work, then kick off another round of sickness. This will be tricky to get right. I am pretty sure we can get half way back to normal, but there will be some painful lessons along the way. Final solution is a vaccine. Let's hope the mutation rate is low, and 1 vaccine will work for a long time.

[Body Surfer]

Today the market focus on earnings which is the main reason for the drop. I agree the market may drop significantly for awhile.

[Bloop Bloop]

I think we are largely in the clear. As far as my country's situation goes, there have been only about 60 deaths and almost all of them were 70+. I called it about three weeks ago - that strict and punitive social distancing rules would greatly reduce the effect of the virus.

[marty998]

I think we are largely in the clear. As far as my country's situation goes, there have been only about 60 deaths and almost all of them were 70+. I called it about three weeks ago - that strict and punitive social distancing rules would greatly reduce the effect of the virus.

Even if we are, we not going back to what the world used to be like. There is no way Qantas is going to restart international flights anytime soon, because its been proven that international travellers do not self isolate when they get here.

There needs to be 2 weeks of zero cases until any of the lockdowns will be lifted. Remember Italy? It was just 2 travellers from Wuhan that have now caused over 150,000 cases and 20,000 deaths.

Restrictions will be lifted in time, but I doubt international travel will restart before Christmas.

[marty998]

I went back and had a look at the charts from the GFC. The Australian market fell 55% from November 2007 to March 2009.

In that time there were at least 3 if not more instances where the market rose 15-20%.

Lots of traps for the unwary.

[Bloop Bloop]

I think we are largely in the clear. As far as my country's situation goes, there have been only about 60 deaths and almost all of them were 70+. I called it about three weeks ago - that strict and punitive social distancing rules would greatly reduce the effect of the virus.

Even if we are, we not going back to what the world used to be like. There is no way Qantas is going to restart international flights anytime soon, because its been proven that international travellers do not self isolate when they get here.

There needs to be 2 weeks of zero cases until any of the lockdowns will be lifted. Remember Italy? It was just 2 travellers from Wuhan that have now caused over 150,000 cases and 20,000 deaths.

Restrictions will be lifted in time, but I doubt international travel will restart before Christmas.

I agree that some sectors of the economy will be hit till the end of the year, but not all sectors. There will be a quick recovery for most.

[soccerluvof4]

I think we will bounce around from the bottom to /around 2800 on the S&P as long as we keep seeing some of the green shoots of late BUT a big reversal with this pandemic and we will drop and set a new low would be my guess. Otherwise we will continue to move up and down with Higher Highs as the good news roles out. But like others have said 3-5 years from now there is no reason we shouldn't be rolling along again and setting new highs. Thats my view for what its worth. And that is how I am investing for the next 5-10 and adjusting

[js82]

I agree that some sectors of the economy will be hit till the end of the year, but not all sectors. There will be a quick recovery for most.

I emphatically disagree with the second part of your statement.  I think there will be a "bounce" when things reopen, but that will recover perhaps half of what was lost, at best.  The rest will be a longer, slower climb.

Supply chains take time to restart.  Businesses that rely on a physical, in-person presence will be slow to recover, as many people avoid larger crowds, and/or opt for online over in-person shopping.  People economically impacted by this situation will slow discretionary purchases until they feel that they're in a safer financial situation.

This quite country-dependent, as well - in a country like Australia where the infection rate is around 1/7th what it is in the USA, it's far more likely that citizens will be comfortable returning to something close to normal much more quickly than in the USA or most of Europe.