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Capital 19 Catch-Up

Markets prepare for the worst

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all posted their worst weekly losses since 2008. The financial carnage spared not one of the S&P’s 11 sectors with all of them down more than 20% from their 52-week highs.

The Dow is on track to post its worst month since 1931. The S&P’s performance is its worst since 1940. The Nasdaq hasn’t looked this bad since the tech bubble burst in 2001.

West Texas Intermediate crude had its worst week since 1991, dropping more than 29%. And it’s headed for its worst month ever, down more than 44 percent month-to-date, so far.

Economists are sizing up the damage. Goldman Sachs came out with one of the worst forecasts: A 24% contraction in the nation’s gross domestic product in the second quarter after a 6% decline in the first quarter. Call it what you will. Bear market, recession or worse. We just don’t know where it ends.

But we can be fairly sure of one thing. We are closer to the bottom than we are to the top. So if you have held your positions down through this terrible time for financial markets we advise you continue to hold.

In fact, not only is holding the correct course of action at this time, the opportunities this market is giving us are tremendous. When this market turns around, and it will, because it always does, the money to be made on the way back up cannot be overestimated.

We are very excited here in the Capital 19 office. The last time we had an opportunity like this was back in March 2009. We have had to wait 11 years for this one to come along.

The bounce might happen very quickly so you need to be ready. We were listening to Dubravko Lakos-Bujas, JPMorgan’s chief U.S. equity strategist, who predicts the S&P 500 to reach 3,400 in early 2021. That represents a 30% increase from where we are today and some stocks could easily put in a 100% gain in that time as all they would need to do is get back to where they were.

“Acknowledging that equity markets globally are now down 30-50% from their recent highs … we see an … upside significantly higher than downside over the next year,” he said.

We are spending a lot of our time searching through markets and getting our lists of stocks to buy ready. Here is one such idea we came across

Laboratory Corporation of America (LH) bills itself as the world’s leading health care diagnostics company. They also manufacture testing kits for COVID-19 and are ramping up production. The first step for every country is to test for who has the virus. This could generate significant sales for LabCorp and since the stock is already bargain basement value we cannot see a single reason not to buy it today.

Disclaimer: Capital 19 Pty Ltd ABN 17 124 264 366 AFSL 441891 (‘Capital 19’) believes the information contained is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. This communication is for general information only and was prepared for multiple distributions and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances. Persons relying on this information should do so considering their specific investment objectives and financial situations. Any person considering action based on this communication must seek individual advice relevant to their circumstances and investment objectives. Subject to any liability which cannot be excluded under the relevant laws. Any opinions or forecasts reflect the judgment and assumptions of Capital 19 and its representatives based on information at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. The investment manager certifies that all the views expressed in this document accurately reflect their views about the companies and securities referred to in this document and that their remuneration is not directly or indirectly related to the views. Capital 19, its directors, representatives, employees or related parties may have an interest in any of the companies and securities in this document and may earn revenue from the sale or purchase of any financial product referred to in this document or any advice. Past performance is not a reliable indicator of future performance. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this document is prohibited without obtaining prior written permission from Capital 19.