“The coronavirus epidemic is taking on a less dramatic profile than had been thought in recent days and what model projections suggested. The markets have noticed this, which is why they have started a a recovery process pretty fast." This was stated by Alessandro Fugnoli, Kairos strategist, in the April episode of the monthly column "On the fourth floor".
According to the analyst, the current trend “is positive, because improve sentiment of consumers and investors, but above all because allows companies in difficulty to recapitalize themselves quickly and smoothly, issuing bonds”.
Can the market rally continue? “Yes – replies Fugnoli – but only as long as the incoming news is positive. However, it is good to keep strong selectivity and a certain one caution. One can then buy whatever the central banks are buying, ie high-quality corporate and government bonds. They're fine defensive stocks, as the utilities. They are fine, but with great caution, solid cyclicals and solid banksespecially if they are large. Instead, you have to be a lot cautious on high-yield stocks, including bankruptcies and debt restructurings, which will penalize bondholders”.
In short, "caution is still needed because the epidemic is not over - continues the Kairos strategist - We will stay at home for at least another month in all Western countries. With no proven cure or vaccine yet, governments fear that once restarted the economy, the infections can rekindle, given that there are many more infected than the statistics tell us ”.
So how to invest in these conditions? “Whoever wants to buy can do it calmly, spreading the operations over time, with a horizon of at least 3-4 months – concludes Fugnoli – Those who have already invested would do better to wait, without buying anything else if they are already sufficiently exposed. Rather, settle your wallet selling the securities that could run into difficult situations to buy safer securities”.
