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Welcome to Episode #216 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Zacks Chief Equity Strategist, John Blank, to talk about the coronavirus outbreak, the bond market madness, the oil price war, and whether the US could actually go into a recession in 2020.
They’ve covered the recession question every year since 2016. So far, the signs just haven’t been there.
But the coronavirus has presented as a black swan type of event in 2020 that no one could have predicted. And its impacts are still unknown.
Will There Be a Technical Recession?
A recession is defined as two quarters of negative GDP. Current forecasts show slowing growth, but not negative growth.
But that doesn’t mean there won’t be a “policy” recession which is usually caused by a government intentionally.
In this case, the government tries to restrict travel, sports events, concerts, even commerce, in order to furlough the economy to contain the virus. This is an intentional government induced slowdown.
When the coronavirus goes away, the problem goes away, the slowing behavior is removed, and an economy can rebound sharply.
This would be the “V” type of recovery.
But what about other scenarios?
Strategies to Invest for a Policy Recession
It’s going to be difficult to invest in the top consumer names because there are simply too many unknowns.
1. While Starbucks (SBUX - Free Report) said same-store-sales in China in the second quarter are likely to decline 50%, it also said the US wasn’t being impacted. But it’s such a fluid situation, that can change daily as the public health response changes in the United States.
2. Chipotle Mexican Grille (CMG - Free Report) doesn’t have the China exposure, but will it be hit in America? Shares are down 25% already on the fears of slowing sales.
3. Lululemon (LULU - Free Report) has stores in China but hasn’t talked about sales impacts yet. Obviously, there have been some. But what about Italy and other European countries and impacts there? Lululemon is expected to report earnings at the end of March. Shares are down 17% in the last month.
4. Disney (DIS - Free Report) is another one that faces many unknowns. Three of its Asian parks have been shut down due to the virus, Disney Shanghai, Disney Hong Kong and Disney Tokyo. It’s movie business could also be interrupted as movie theaters close in key European and Asian markets.
5. JPMorgan Chase (JPM - Free Report) is facing other problems, including the Federal Reserve’s 50 basis point emergency rate cut and the possibility of more to come. Lower rates hit bank earnings hard. Shares are down 27% over the last month. But watch out for value traps.
What else should investors know about investing during this volatile time?
Listen to this week’s podcast to find out.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Will the Coronavirus Send the US into Recession?
Welcome to Episode #216 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Zacks Chief Equity Strategist, John Blank, to talk about the coronavirus outbreak, the bond market madness, the oil price war, and whether the US could actually go into a recession in 2020.
They’ve covered the recession question every year since 2016. So far, the signs just haven’t been there.
But the coronavirus has presented as a black swan type of event in 2020 that no one could have predicted. And its impacts are still unknown.
Will There Be a Technical Recession?
A recession is defined as two quarters of negative GDP. Current forecasts show slowing growth, but not negative growth.
But that doesn’t mean there won’t be a “policy” recession which is usually caused by a government intentionally.
In this case, the government tries to restrict travel, sports events, concerts, even commerce, in order to furlough the economy to contain the virus. This is an intentional government induced slowdown.
When the coronavirus goes away, the problem goes away, the slowing behavior is removed, and an economy can rebound sharply.
This would be the “V” type of recovery.
But what about other scenarios?
Strategies to Invest for a Policy Recession
It’s going to be difficult to invest in the top consumer names because there are simply too many unknowns.
1. While Starbucks (SBUX - Free Report) said same-store-sales in China in the second quarter are likely to decline 50%, it also said the US wasn’t being impacted. But it’s such a fluid situation, that can change daily as the public health response changes in the United States.
2. Chipotle Mexican Grille (CMG - Free Report) doesn’t have the China exposure, but will it be hit in America? Shares are down 25% already on the fears of slowing sales.
3. Lululemon (LULU - Free Report) has stores in China but hasn’t talked about sales impacts yet. Obviously, there have been some. But what about Italy and other European countries and impacts there? Lululemon is expected to report earnings at the end of March. Shares are down 17% in the last month.
4. Disney (DIS - Free Report) is another one that faces many unknowns. Three of its Asian parks have been shut down due to the virus, Disney Shanghai, Disney Hong Kong and Disney Tokyo. It’s movie business could also be interrupted as movie theaters close in key European and Asian markets.
5. JPMorgan Chase (JPM - Free Report) is facing other problems, including the Federal Reserve’s 50 basis point emergency rate cut and the possibility of more to come. Lower rates hit bank earnings hard. Shares are down 27% over the last month. But watch out for value traps.
What else should investors know about investing during this volatile time?
Listen to this week’s podcast to find out.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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