It may be time to ring the register on some of your stock holdings as numerous worries on the health of the global economy pile up.
AdvisorShares CEO Noah Hamman said on Yahoo Finance’s The First Trade he thinks the market has peaked on a short-term basis. Hamman’s call is not purely based on February’s momentum in the markets taking stocks to inflated valuations (not seen since 2002 depending on what metric you use), but also a result of the economic ramifications of the coronavirus. Already companies from Apple to Coca-Cola to Walmart have cautioned investors to expect pressured profits in the first half of the year due to coronavirus aftershocks.
Put these factors together — complacent markets and rising bottom line risks — and pros such as Hamman are beginning to think the market is overdue for a cooling off period.
“There is still a certain amount of uncertainty around it [the coronavirus]. I think that has changed our view of not fighting the Fed to getting hedged while this hopefully works itself out,” Hamman says.
To that end, the market could be starting to crumble under its own weight of artificially high expectations. Following a mysterious intraday plunge in stocks on Thursday, markets continued to stumble on Friday. The Dow Jones Industrial Average fell more than 200 points in early trading as investors booked profits on lackluster European manufacturing data and a disappointing read on U.S. existing home sales.
Investors also continued to take their cues from the Treasury market — the 30-year U.S. Treasury yield sank more than 7 basis points to an all-time low of 1.8904%.
Risk-off in its finest form.
“Investors are certainly selling equities and buying fixed income. They are looking to get a little more defensive in their portfolio overall and figure out how they can lock in gains,” explained UBS global investment strategist Jason Draho. “They aren’t selling out entirely, they are staying aggressive but looking to trim areas that have performed very well.
Draho said it’s tough right now for investors because with expensive assets all over the place, it’s unclear where to put your money.
Cash doesn’t sound too bad in the near-term.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.