Now the coronavirus epidemic has exploded, how should move on the markets? What are the best investment choices, if not to earn, at least to limit the damage? Second Alessandro Fugnoli, Kairos strategist and author of the column "The Red and the Black", at the moment he is "late to sell"and "still too early to buy".
In his latest article, the analyst emphasizes that one must not be in a hurry. So far stock exchanges have already lost 10% and this could lead one to think that the coronavirus effect has already been priced in. However, according to Fugnoli, the decline recorded so far could have occurred "even in the absence of an epidemic, due to the simple overload of bullish positions after six months of non-stop racing".
So when should you come back? To establish a deadline, it is necessary to wait for "the level of alarm in America to reach at least what we are experiencing today in Italy - the Kairos strategist continues - where, however, there are still few cases".
Of course, starting the covering immediately is a viable path, but whoever chooses it must be ready for the worst, because – continues Fugnoli – the next two farms will be dotted with negative macroeconomic data and until the end of March they will continue to arrive not very exciting numbers even on the front of corporate balance sheets.
In this scenario, many investors are anxiously waiting the assistance of the central banks, but the monetary aid will not be immediate. The analyst points out that “the ECB is paralysed” and that “the Fed, in order to renege on the official thesis that everything is going well, needs to see at least some negative data”.
As for expansionary fiscal policies that the European governments are preparing to launch - the Italian Treasury Minister, Roberto Gualtieri, has already announced a 3,6 billion plan – they will be useful, but they will act on the demand side, while the current crisis is above all affecting the supply side.
“Prudence and patience, therefore – concludes Fugnoli – Caution because they cannot be excluded serious tail risks (a global recession) if the epidemic were to continue over time and spread further in space. Patience because there will be various false starts (the first one has already been there) before the real one, which will arrive in any case”.
