A research house that called the COVID-19 market sell-off as early as February says investors should 'buy the dip' if stocks fall 5-10%
- Analysts at BCA Research are recommending investors "buy the dip" if stocks fall 5-10% from current levels.
- BCA Research analysts predicted in February that stock markets were too complacent about the potential impact of COVID-19 before a huge sell-off took place.
- The analysts, led by Peter Berezin, said that even with virus cases surging in the US, new lockdowns of the severity of those seen earlier in the year are unlikely, meaning the economic downside risks are minimal.
- They also expect both West Texas Intermediate and Brent oil to rise to between $60 and $80 in 2021.
A research house that saw March's coronavirus-driven market correction coming as early as February is recommending investors "buy the dip" if stocks fall 5-10% from current levels, MarketWatch reported Tuesday.
BCA Research analysts led by Peter Berezin, acknowledged a "nervous" atmosphere in global markets, but said in the firm's third quarter outlook report that they recommend investors "'buy the dip' if global equities were to fall 5% to 10% from current levels."
Berezin said: "While the pace of reopening will slow, there is little appetite for the sort of extreme lockdown measures that were implemented in March."
"The US Congress will ultimately extend fiscal support for households and firms. Around the world, both fiscal and monetary policy will remain highly accommodative, which should provide a supportive backdrop for stocks," Berezin added.
Almost all states in the US have been facing growing number of COVID-19 cases in recent weeks, threatening fresh lockdowns and likely the V-shaped recovery many have forecast. An alarming number of COVID-19 cases are hitting states such as Texas, California, Arizona.
The US recorded over 55,000 new cases in a single day last Thursday, the highest number ever.
But BCA Research thinks the downside will be a bit more limited despite the resurgence in cases.
"We are unlikely to see the sort of broad-based economic dislocations experienced in March," the analysts wrote given masks and other preventive measures are likely to still be in place.
The company is betting that stimulus measures will still still be in place, something which is expected to help stocks from reaching new lows.
The analysts wrote: "Politically, stimulus remains very popular. Unlike during the housing bust, there has been little moral handwringing about bailing out households and firms that 'don't deserve it.'"
The analysts recommend investors to learn towards cyclical stocks rather than invest in defensive or non-US stocks.
BCA's analysts are also bullish on both US West Texas Intermediate oil prices and Brent crude, the global benchmark to rise.
It expects both benchmarks to average between $60-$80 per barrel in 2021. Brent is currently trading at about $43, while WTI is at $41.