- One hedge fund CIO is encouraging investors to just "sit back" for now amid the Coronavirus outbreak.
- Another strategist said a 10% pullback would be within historical norms but becoming "overly defensive" would be a mistake.
- The strategist added the economic expansion can continue for two years or more.
Ryan Tolkin is the Chief Investment Officer at Schonfeld Strategic Advisors, a global hedge fund with $30 billion in assets under management. On Thursday, he was interviewed by CNBC’s “Squawk Box” crew and asked for his take on the Coronavirus outbreak and where investors can find opportunities.
The Coronavirus is certainly a “big thing” that can impact markets but any quantitative estimate is difficult to derive at this time, he said. It is also difficult to imagine when the Coronavirus outbreak will reach peak levels and this will create short-term uncertainty.
Tolkin said his hedge fund isn’t buying any stocks on near-term weakness as it is wise to “sit back” for now.
The professional money manager went on to say his fund holds 10,000 different stocks worldwide which offers a degree of safety against these types of market uncertainty.
Investing In Asia
Schonfeld’s hedge funds have been active in deploying capital across Asia prior to the outbreak. He said his fund is looking to take advantage of “dislocations” from global trade uncertainties and encouraging market structure changes at the government level in many countries.
“More and more of our business focus today on investing internationally as compared to where we were five or ten years ago,” he said.
By weight, approximately 30% of all investment dollars are located outside of the U.S. and this figure is roughly split equally between Europe and Asia, he said.
Spark To Take Profit
The S&P 500 index is up 12% since October alone and if history is any indication, a “quick big run” like that is immediately followed up with some profit-taking, Scott Wren of Wells Fargo Investment Institute said on CNBC’s “Power Lunch.” The Coronavirus is the “spark for that” although the pullback has so far been “minor” at around 2% to 3% from the highs.
Even if markets pull back by 10%, it wouldn’t be out of the norm from a historical perspective, he said. Nevertheless, investors should be prepared to protect themselves on any downside but avoid being “overly defensive.” Also, investors should keep in mind the economic expansion could continue running for two years, or more which creates a potential buying opportunity.
CNBC’s senior economics reporter Steve Liesman also said on “Power Lunch” he studied the potential impact on the U.S. economy from the Coronavirus. Under a “base case” scenario, the U.S. GDP would be impacted by a single percentage point, but the economy can recover “fairly quickly.”
“If you are investing for your return at the end of the next quarter, the Coronavirus should be 80% of what you are concerned about,” Liesman said. “If you are thinking about the next five years… maybe 1%.”