Pro talks macro environment: ‘very little visibility’

By: Jayson Derrick
Jayson Derrick
Jayson lives in Montreal with his wife and daughter, loves watching hockey, and is on a lifelong quest to perfect the… read more.
on Oct 27, 2020
  • The near-term macro environment does not look favorable for investors.
  • Soaring COVID-19 cases, absense of stimulus clarity, the U.S. election are to blame.
  • It is "troubling" how few companies issued guidance, according to one pro.

The two key traits investors look for to conclude the macro environment is stable include growth and stability, Cornerstone Macro Chief Investment Strategist Michael Kantrowitz said Tuesday morning on Fox Business.

‘Very little visibility’

The unfortunate reality is surging COVID-19 infection rates across the globe are rising, U.S. stimulus efforts appear to have stalled, and the hotly contested presidential election is now just days away, Kantrowitz said. As such, there is “very little visibility” that the macro environment will show signs of stability.

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This begs the question if investors should take advantage of the now two-day weakness and the answer isn’t a straightforward yes.

Investors may want to buy the dip in companies with strong fundamental companies although it is certainly not time to “swing for the fences,” he said. The fact is the macro environment won’t “turn around on a dime” and patience is needed to wait for a broader-based economic recovery.

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Growth equation

The growth part of the equation is just as unclear and comes at a time when the stock market has performed very well since bottoming in March. At the time of the interview’s recording, 140 companies have reported their earnings but it is “troubling” the large number of companies that forego any form of guidance.

The absence of guidance implies investors are left guessing how much or if a company will grow in the near-term and into the new year and beyond.

Easy money already made

The easy money in the market has already been made in reaction to large-scale stimulus measures in reaction to the economic disruption caused by the COVID-19 pandemic, CMC Markets Chief Market Analyst Michael Hewson added to the conversation.

Similar to what Kantrowitz said, the macro environment looking forward remains uncertain, even after U.S. and global banks reported encouraging results, Hewson said. 

Meanwhile, expectations for new stimulus injections from the U.S. government are minimal while European leaders agreed on a stimulus package of their own but it has yet to be ratified, he said. In fact, current estimates only call for the package to be ratified and finalized in the first quarter of 2021.

As such, it is “important” for investors to understand now is not the time to rush back into stocks at this time.

“We are going to endure a significant amount of volatility as we head into year-end,” he said. “So I would put a lot of money into cash and wait for opportunities to present themselves.”

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