The stock market crash isn’t over yet.
At least that’s the word coming from JPMorgan Asset Management Inc. strategist Marcella Chow. Investors, Chow said, shouldn’t be fooled into thinking the recent two-day rally in stocks means the worst is over. The S&P 500 has gained 3.6% in two consecutive sessions this week, its biggest two-day rally since August.
Chow said that the global stock market crash has put her on edge and she is urging her clients to stay away from equities—or at least be very selective.
“Am I worried? Yes,” Chow said in a phone interview with Bloomberg. “There’s so much uncertainty. Equities might not be a wise choice.” (Source: “Strategist for $1.7 Trillion in Funds Says Rout Has Room to Run,” Bloomberg, February 16, 2016.)
Chow is telling her clients to instead transfer their assets to bonds—and she’s putting her money where her mouth is. She said she’s pouring as much as 70% of her own portfolio into bonds, including U.S. Treasuries. She plans to remain in safety assets until the current market volatility shows signs of calmness.
Global markets have rebounded this week, recouping some of the losses that have began at the start of 2016 that have sent some markets into bear market territory. Brent crude oil has also rebounded, climbing up to about $33.00 a barrel after top oil producers agreed to freeze output.
But none of these signs convinces Chow that the current stock market rout is over. The sell-off in stocks this year, Chow said, won’t stabilize until China’s economy shows signs of improvement and central banks regain confidence with investors.
“China’s growth stabilization story is still unclear,” said Chow. “We have to wait and see what happens.” (Source: Ibid.)
Chow believes the Federal Reserve will not raise interest rates any time soon, making U.S. Treasuries the best place for investors to park their money during the current market turmoil.
“Even though it’s tempting to hold cash given how crazy markets have been, it’s better to go for stable bonds,” Chow said. “At least you can generate a few percentage points in returns.” (Source: Ibid.)