CNBC: Beware of Chasing Bear Market Rallies, Strategists Warn

March 30, 2020

Article by Nancy Hungerford in CNBC financial

Investors in Asia are kicking off the new trading week with a note of caution, keeping an eye on volatility emanating from Wall Street.

Following the Dow’s biggest weekly rally since 1938, and the best performance for the S&P 500 and Nasdaq on the week since 2009, investors are debating whether U.S. markets have already bottomed or if more pain is in store.

Attributing the recent gains in equities and emerging market currencies to extraordinary monetary and fiscal stimulus measures, Eric Robertsen, head of global macro strategy at Standard Chartered, warned clients that the risk-rally lacks sustainability. 

Consumer confidence hit

“The release of Q1 brokerage statements over the next month will coincide with the release of global economic data showing the depths of the economic collapse,” Robertsen explains in his weekly note. “We believe these two factors combined will exacerbate the weakness in consumer confidence, already under attack from the growing health crisis and the prospect of extensive unemployment.”

He pointed out that while the market declines have been well publicized, these first quarter statements will put “negative returns in black-and-white print” for retail investors. The losses incurred on traditionally safe investments will also hit home, Robertsen suggested, pointing to a recent 5% to 15% decline in exchange-traded funds tied to U.S. credit markets.

Investors are waiting on a deluge of economic data this week stateside that could fuel economic gloom.

Robertsen looked back to the global financial crisis as a lesson in policy-induced rebounds. “Don’t forget that equities bounced in November 2008 when support measures were announced, before trading down to new lows in March 2009. Only then did the recovery begin.”

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