Are we there yet?
The market plunge over the past couple of weeks has been a sight to behold but chances are that investors should be bracing for more downside.
That’s according to analyst Larry Berman who thinks that as far as this correction goes, another ten per cent could be in the cards.
Markets fell hard on Monday as worries over a general economic slowdown continued to pull investors out of equities and into bonds or cash. The S&P/TSX Composite Index dropped 10.3 per cent yesterday, bringing it to its lowest level in 14 months at 14,514.24, down 1,660.78 for the day.
All corners of the market felt the pain including the technology sector where high flying names like Shopify and Lightspeed POS took it on the chin, losing ten and 13 per cent, respectively, and even defensively-minded names in the utilities like BCE and Rogers were abandoned, losing almost seven and nine per cent, respectively.
Larry Berman, co-founder, partner and chief investment officer for ETF Capital Management, said the losses may look big but they’re actually understandable considering the market’s torrid bull run of late.
Appearing on BNN Bloomberg Monday, Berman was cautious.
“I like to look at opportunity in an event like this and hopefully some of the viewers have been on my wave of thinking over the last few months where the the excess valuations in markets were an opportunity to take some money off the table, and now you've got opportunities to put things back to work.”
“I don't think today is the bottom. I think clearly there's value to be had but I think we're a lot closer basis S&P500 to where we were in December of 2018 around the lows, call that around 2350 to 2750-ish at the moment. So there's still another 10 per cent or so downside before the average stock out there gets into what I would call value territory,” Berman said.
Bonds have been scorched in recent weeks, most notably on Monday where the benchmark US 10-year Treasury note dropped to a record low of 0.318 per cent, as investors ran for safety amid both the ongoing coronavirus crisis and a mammoth drop in oil prices.
“There's absolutely nothing healthy about [bond yields],” says Berman. “They are here because they're in crisis mode, and this is not a reason to get bullish on valuations for equities at the moment, but that point will come again next week, next month next six months, I don't know exactly.”
“But as that value presents itself, what I'm going to be doing for my clients, for example, is getting out of the defensive holdings and shifting more of that money into some of the great dividend paying stocks that are out there around the world and participating in the recovery when it when it plays out,” he added.
“And there will be a recovery because there's always a recovery,” Berman said.