The short-term macroeconomic environment does not look favorable for investors.
The sharp rise in COVID-19 cases, the lack of clarity of stimuli, and the elections in the United States are to blame.
It is “disturbing” how few companies have issued guidelines, according to one proponent.
Among the two main characteristics that investors are looking for in order to conclude that the macro environment is stable are growth and stability, said Michael Kantrowitz, Chief Investment Strategist at Cornerstone Macro, Tuesday morning in Fox Business.
Very low visibility’.
The unfortunate reality is that COVID-19 infection rates around the world are skyrocketing, US stimulus measures appear to have stalled, and hotly contested presidential elections are only days away, Kantrowitz said. It is therefore “very little visible” that the macro environment will show signs of stability.
This raises the question of whether investors should take advantage of the now two-day weakness, and the answer is not a clear yes.
The answer is not a clear yes. Investors may want to buy the weakness of companies with strong fundamentals, although it is certainly not time to “jump the fence,” he said. The fact is that the macroeconomic environment is not going to “turn over to a penny” and you have to be patient to wait for a broader economic recovery.
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The growth part of the equation is also unclear and comes at a time when the stock market has performed very well since its low in March. At the time the interview was recorded, 140 companies were reporting their profits, but it “worries” the large number of companies that are giving up any form of leadership.
The lack of guidance means that investors have to guess how much or whether a company will grow in the near future and into the new year and beyond.
Already easy money
The easy money in the market has already been earned in response to large-scale stimulus measures in response to the economic disruption caused by the COVID 19 pandemic, CMC Markets Chief Market Analyst Michael Hewson added to the conversation.
Similar to Kantrowitz, the forward-looking macroeconomic environment remains uncertain even after U.S. and global banks have reported encouraging results, Hewson said.
Meanwhile, expectations for new stimulus from the U.S. government are minimal, while European leaders have agreed on their own stimulus package, which still needs to be ratified, he said. In fact, according to current estimates, the package will not be ratified and completed until the first quarter of 2021.
Therefore, he said, it was “important” for investors to understand that now was not the time to jump back into stocks at this point.
“We will have to accept considerable volatility until the end of the year,” he said. “So I would invest a lot of money in cash and wait for opportunities to arise,” he said.