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The bags go from panic to relief and now demoralization "is yet to come"


The coronavirus it is altering everything, also the bags, who are living a heart attack days. Investor sentiment is on the surface, and it is moving sharply with each news that comes about the outbreak and the steps being taken to combat it. That is why they have gone from panic, with historical falls, to a certain relief that many label as the dead cat bounce. And what can you expect now? Experts are clear: demoralization, which "is yet to come."

This is stated by Tony Dwyer, a strategist at Canaccord Genuity, who believes that the Covid-19 crisis will continue to hit markets, and especially equity, as long as there is no more clarity on the virus or the epidemic is stopped. "It is impossible to reach a reasonable turning point, so we are trusting human nature as a guide," he says, and the problem is that fear is taking over the operation.

This Wall Street strategist says there are three phases to a downturn like the one markets are experiencing: panic, relief and demoralization. According to Dwyer, what happened last Thursday, when the biggest drop in the history of the Ibex and the Dow Jones suffered its biggest crash since 1987, "only occurs in an accident" and is somewhat indicative of panic.

The phase of relief It takes place, says this expert, when there is a 'reflex' rally. Investors are "just glad the market has stopped falling", but in reality you shouldn't be throwing your bells on the fly, given the current stock market situation. And the problems are so important that it is difficult for the climbs to have continuity.

The bags have already gone through these two phases, and now only the one of the demoralization, which according to Dwyer comes when the market tries panic and then breaks it, as seen in October 2011. "The good news is that this is quickly followed by a significant takeoff in stocks.", says the Canaccord Genuity analyst. In fact, he is optimistic and believes that most of the shock "has probably already happened."


"It is unclear in what state the markets will return on Monday," says Connor Campbell, an analyst at Spreadex. At IG they believe that the rebound of the stock markets has simply provided the "opportunity to sell once again, as has been the case in recent days, and We will see new lows in the indices as the global coronavirus crisis grows more intense"

In reality, says analyst Chris Beauchamp, "It will be difficult to see many increases in the stock markets until the US has made its way through the virus, something that may be at least a month away, and until then. the increases, even if they are 10%, will be sold. "

"Trying to rationalize what is happening is pointless," say Abante experts, who point out that despite "the nature of each crisis is different, the reaction of the market and investors is very similar." "At times like the present, in which fear, uncertainty and emotions predominate, these are incorporated into prices, so it is difficult for them to reflect the real value of things," they point out.

And they believe that "After the falls we have seen, it is very difficult to anticipate when the markets will calm down". "After an earthquake there are usually aftershocks and it is not ruled out to continue seeing very sudden movements in both directions. The bags are going to recover with complete certainty, what we don't know is when.


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