The bull market will return with a vengeance, this investor says

It may take a while but the bull market will return in a big way, says portfolio manager Jay Bala of AIP Asset Management, who argues that much of the panic selling has no basis in economic realities.

Markets took another beating on Thursday, the worst day for the TSX in over 70 years as 12 per cent of its value got wiped out in one trading session.

Despite an early halt in trading where a so-called circuit breaker prompted a temporary stoppage, investors responded to the barrage of foreboding news -from the US closing its borders to travel from Europe to the cancellation of sports leagues to prognosticator’s warnings that it could be up to a year before the coronavirus finally abates— by selling everything in sight, most especially energy stocks which took a further pummeling on Thursday.

Our most recent note of comparison, the 2008-2009 financial crisis, is brought to mind, even as the pace of this month’s crash has in fact been swifter, with no telling when the bottom will be reached.

But bottom out it will and when the market does begin the road to recovery, Bala is betting on a triumphant return of the bull market, simply because the extent of economic woes attached to the coronavirus are truly small in comparison to the 2008 crisis.

“This is not like the financial crisis where it's like, you couldn't go to the bank and you're worried that maybe you couldn't get your money out of the bank. This is like a slow
progression of maybe you have a small population decline over a large period of time,”
said Bala, speaking to BNN Bloomberg on Thursday.

“And so what we're saying is, look, the virus is going to be here for an extended period of time but I think the markets themselves will eventually bounce back in the next one to two quarters. And that's really just going to be a function of the same thing that's happening in 2008 2009 where global central banks just step up and do quantitative easing, and we're just going to keep pounding money till everybody just calms down again,” he added.

With the bears now in control of the S&P 500 and Dow Jones, investors are hard-pressed to stay the course and not sell, but experts say selling at the wrong time could mean years and years before your portfolio recoups its losses.

Bala said that even considering the possibility that worldwide deaths from the coronavirus become even more significant, the overall economic impact is slight.

“The kill rates is about one per cent so let's just assume 100 per cent of the population gets it. Okay, and 1 per cent of the population dies. Right, it's a terrible thing, don't get me wrong, horrible and horrifying, but severely impacting the economy out a year or two from now? Marginal,” Bala says.

“I think that's where we're at and given the market sell off I really do think there's a ton of value out there, there are tons of good-quality companies,” he says.