In a massive comeback rally, the Dow Jones exploded more than 1,200 points in a day.
It was certainly a sight for sore eyes that watched the market plunge 3,500 points in previous days. All on hopes G7 finance ministers would meet to discuss the coronavirus and coordinate an economic recovery plan.
Unfortunately, G7 failed to deliver anything.
While the group said they’d use policy tools to curb an economic slowdown, their statement contained no specific actions whatsoever. Investors, hoping for some sort of coordinated action to come from global authorities, were instead told:
“Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase,” the statement said, as quoted by CNBC. “G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.”
Unfortunately, there were no specifics on actions, which is forcing markets lower.
Stocks Haven’t Bottomed Yet, Says Charles Schwab
Analysts at Charles Schwab advises against buying the dip, noting, ““My general rule of thumb, which has been pretty consistent, is if you’re going to start buying on a dip, you need to wait until you get two good solid up days,” as quoted by MarketWatch.
Markets may only find their bottom once coronavirus headlines begin to slow down.
“I don’t think we’ve seen that just yet. People need to be a little bit cautious and wait. We don’t know where the bottom’s going to be, but it doesn’t feel as though it’s here just yet. It’s too risky to be doing any bargain hunting and buying at the moment, but that also means don’t panic and sell out of your 401(k) and retirement portfolios. Just simply wait and see how this plays out,” the analysts added.
While there are plenty of analysts that will tell you the bottom is in, like Bernstein, which just said, it’s “not time for investors to sit on the fence,” it’s okay to sit on the fence. Your money may be safer waiting for the bottom to truly appear.
Mohamed El-Erian still advises that investors stay on the sidelines, as well.
“I stress, this is different,” he said. Just because buying market dips has worked in the past does not mean it’s going to work this time, he said, as quoted by CNBC. “I would continue to resist, as hard as it is, to simply buy the dip.”
