If coronavirus infections decline and Congress passes a fiscal stimulus package, Invesco’s Kristina Hooper says, stocks will make a sustainable comeback.
She made the call as the Dow was plunging into a bear market, which reflects a 20% or more drop from 52-week highs.
“I don’t think we’ve hit a bottom yet,” the firm’s chief global market strategist told CNBC’s “Trading Nation” on Wednesday. “What’s going to be critical is the fiscal response, particularly tying it to keeping those Americans afloat who have lost work because of the virus.”
According to Hooper, the health care and the Federal Reserve’s monetary policy responses to the pandemic aren’t enough to help Wall Street and Main Street weather the economic fallout.
“It really depends on policy,” she said. “What could cause a bottom, could be a powerful catalyst for stocks to move up, of course, is if we actually get appropriate fiscal policy.”
On Wednesday, the markets got slammed after the World Health Organization declared the coronavirus outbreak a pandemic. The Dow fell almost 6% and is now 20% off its all-time high. The S&P 500 and Nasdaq are both 19% below their record highs.
Hooper, who oversees more than $1.2 trillion in assets and is a long-term secular market bull, is advising clients to keep money working in stocks despite the damage.
‘We’re telling them not to panic’
“We’re telling them not to panic,” she said. “Stocks have an interesting gravitational pull upwards, and that’s really what happens if you have a long enough time horizon.”
Hooper is encouraging clients to casually start looking for new opportunities.
“We’re telling investors to sharpen their pencils,” she added. “What really looks attractive are Chinese equities and actually Asia EM [emerging markets] equities. Keep in mind that China is on the other side of this crisis. They’re seeing a real reduction in the growth rate in infections. And, what we’re hearing from U.S. companies is that operations are ramping up.”