Buy the dip.
A day after the Dow Jones plummeted 1,000 points, some analysts said to buy the dip.
But that’s the worst advice anyone could have given you.
· “I think it could be a buy-the-dip opportunity,” Tim Chubb, chief investment officer at Girard Partners told The Street.
· “Don’t let short-term concerns cloud your long-term thinking and prompt you into knee-jerk reactions,” said Greg McBride, chief financial analyst for Bankrate.com. “If you’ve been waiting for a better buying opportunity, the stock market is 3% cheaper today than it was Friday.”
Initially, “buy the dip” investors cheered as the Dow recovered earlier today. But cheers turned to jeers, as the Dow slipped another 140 points, as virus fear explodes. South Korean cases are nearing 1,000 with 11 deaths. Iran’s Deputy Health Minister has been infected. And now, we’re seeing cases pop up in Switzerland, Austria, and Spain.
It’s not time to buy the dip at all, say many analysts.
CNBC’s Jim Cramer even noted not to buy the dips.
“Things I need you to consider: 1. possible Milan to US outbreak, 2. GILD drug not working, 3. Moderna vaccine too far away, 4. eps weakness preannouncements,” he said in a series of tweets. “I put those negatives out there because they are all possibilities and can’t be overlooked. Which is why I don’t like to buy into a rally.”
Economist Mohamed El-Erian also warned against buying the dip.
“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.”
Disruptions to corporate earnings and economic growth from “shock” events such as the coronavirus tend to stick around longer than more fundamental downturns, he added.
What makes this situation even more dangerous is a World Health Organization (WHO) warning for the world to be ready for it to come “knocking on the door.”
Just moments ago, “GENEVA-HEAD OF JOINT WHO-CHINA CORONAVIRUS MISSION AYLWARD SAYS VIRUS IS A RAPIDLY ESCALATING EPIDEMIC IN PLACES, HAVE TO TACKLE SUPER FAST TO PREVENT A PANDEMIC,” as reported by Reuters.
Some of the only stocks moving higher on the virus story, include:
Pro Shares Ultra VIX Short-Term Futures ETF (UVXY)
One of the best volatility ETFs to keep an eye on is the Pro Shares Ultra VIX Short-Term Futures ETF (UVXY), which was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
Moderna Inc. (MRNA)
Moderna just shipped an experimental coronavirus vaccine to the U.S. government for testing just six weeks after it started work on the immunization. The company also noted the first vials of the experimental vaccine would be used in a planned Phase 1 study in the United States, which typically involves testing a vaccine on a small number of healthy humans, as reported by CNN. Trials could begin as early as the end of April 2020.
Gilead Sciences (GILD)
GILD has already started testing its antiviral remdesivir in patients with success. Preliminary results from GILD’s clinical trials are expected in the next three weeks, says the World Health Organization. The experimental compound is the “one drug right now that we think may have efficacy,” Bruce Aylward, assistant director-general at the WHO, as quoted by Bloomberg.
If folks tell you to buy the dip, you may want to consider ignoring them.
