Issue

Buy the Pandemic Dip

coronavirus pandemic

Most market analysts believe the stock markets are going to be range bound for the duration of this coronavirus pandemic.

Other analysts disagree. One analyst in particular, who called the March dive in stocks in February, is now saying buy the next dip.

Analysts at BCA Research released a note recognizing that investors are nervous right now amid the coronavirus pandemic, but those nerves can’t last forever.

BCA believes that while the pace of the American reopening will slow as COVID-19 cases are spiking, most Americans are ready to get back to normal. That means they won’t put up with the extreme lockdown measures we saw back in March and will get back to business as usual.

At the same time, central banks around the world will continue providing fiscal support like stimulus checks. That will come on top of monetary support like low interest rates and cheap loans from the government to businesses.

Given all that support, BCA believes investors should be buying the dip if stocks fall between 5% to 10%.

That’s not such a crazy idea, especially since governments can’t afford to see their markets or economies collapse because of the coronavirus pandemic.

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The Big News . . .

Another Iconic Retailer Goes Bust

Menswear store Brooks Brothers, founded in 1818, has filed for bankruptcy. The retailer had been seeking a buyer, but the process was disrupted by the coronavirus. With millions of consumers not going to office or attending formal events, sales have dropped off and potential buyers stepped away from a deal. Brooks Brothers has more than  500 stores worldwide. It plans to  close at least 50 U.S. stores and continue to seek a buyer.

Reopen Schools . . . Or Else

President Trump has tweeted that the federal government may withhold funding from schools that do not resume in-person classes this fall. He also said the CDC guidelines for reopening schools are needlessly complicated. Those guidelines include cleaning and disinfecting frequently touched surfaces, spacing seating six feet apart and closing communal-use spaces.

Brazilian President Diagnosed With Coronavirus

Heads of state aren’t immune to the novel coronavirus. Brazilian President Jair Bolsonaro has tested positive for COVID-19. The president confirmed his diagnosis  Tuesday and said that his symptoms included fever, cough, tiredness and insomnia. Other notable heads of state that have had the virus: Canadian Prime Minister Justin Trudeau; Honduran President Juan Orlando Hernández; and Israeli Health Minister Yaakov Litzman.

The Coronavirus Numbers

Here the numbers in the coronavirus pandemic from Wednesday at 8:06 a.m. ET:

  • 11.981,313 Infected worldwide
  • 547,324 Global deaths
  • 3,097,538 Infected in the U.S.
  • 133,991 Deaths in the U.S.

What’s Next?

I think BCA is being a bit too bullish, especially since it didn’t provide any solid upside targets in its research note. Where exactly does it think we go from here?

That said, if you have a high risk tolerance and can afford to wait for the inevitable recovery, I wouldn’t be shy about picking up some bargains after a sell-off.

I’d probably just stay away from most retailers.

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Yours in Health & Wealth,

Ben Shepherd

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