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Coronavirus pandemic to trigger 'another selling wave' in the stock market soon: expert

Brian Sozzi
Editor-at-Large

Brace for another selling wave in the markets, numerous veterans of Wall Street tell Yahoo Finance.

So much for the “rebalancing rally” in stocks that has erupted this past week.

“Is the market going down 50% a la the dot com bubble? I don’t think it’s going down 50%. I think you’re going to have another selling wave at some point in the first half of April and then you’ll get a much better rally from there,” Heritage Capital chief investment officer Paul Schatz said on Yahoo Finance’s The First Trade.

Pick your poison on what could trigger that massive reversal back to the late March lows.

The economic data over the next several weeks stands to be downright dreadful as the coronavirus has shut the U.S. economy down. Initial jobless claims of 6.6 million last — more than 10 million in the past two weeks —are a harsh reminder of the type of brutal data that lays ahead as a key risk for equities.

Moreover, by mid-April, investors may be on the receiving end of an avalanche of further downward revisions to economic forecasts by Wall Street. That would occur at the same time as another earnings season kicks into high gear. This go around, more companies are apt to pull 2020 forecasts, cut dividends and halt stock buybacks given the unpredictable trends in their business.

In this March 21, 2020 photo, a lone pedestrian walks his dog past the New York Stock Exchange as COVID-19 concerns empty a typically bustling downtown area in New York. New York Gov. Andrew Cuomo announced sweeping orders Friday that will severely restrict gatherings of any size for the state's more than 19 million residents and will require workers in nonessential businesses to stay home. (AP Photo/John Minchillo)

In short, the news flow could be quite detrimental to stocks as coronavirus infection tallies in the U.S. continue to climb.

“Of course the whole cake hasn’t been baked in yet as far as the coronavirus goes. You could go down and make a double bottom or go down and make a new low. If we go down and make a new low, you could see 1,750 on the S&P 500 which is pretty extreme,” cautioned Optimal Advisor Solutions portfolio manager Frances Newton Stacy.

Ongoing bullishness in stocks persists, too — this will likely have to be unwound in a hurry as the bad economic and Corporate America news piles up this month.

Pointed out RBC strategists in a new note Thursday detailing a survey of 185 institutional investors, “Those describing themselves as bullish or very bullish rose from 51% in our December survey to 58% in March, the highest we have seen since we started our survey nine quarters ago. This stands in contrast with our December 2018 survey, when bears spiked and bulls eased back. Those who say valuations are attractive or very attractive surged to 57%, a new record for the survey.”

Sound the selling alarm.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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