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What 5 St. Louis money managers are telling clients about coronavirus

27 February 2020

(St, Louis Business Journal)

February 26,2020 (Greg Edwards)

With the coronavirus scaring the bejesus out of financial markets, and the Dow tumbling 2,000 points in two days, we asked St. Louis wealth managers what they are telling nervous clients.

Dave Simons, senior vice president of investments at UBS in St. Louis, said his message to clients is that “we don’t know how deep this will run.”

“It could be contained in a week or go on for months. So let’s remember the plan we set up for you – your risk tolerance, the right balance of investments, your retirement goals. Built into that plan is the possibility of a downtown like this,” he said. “We don’t know the eventual impact on the Dow or GDP, but the market has so far been resilient. I have said previously that I would welcome a pullback – not because of the coronavirus – but strictly as a needed correction. A correction is normal, overdue and not a bad thing at all.”

Joe Terrill of Terrill & Co., said he doesn’t believe the coronavirus will “cause the world economy to fall apart.”

“Not to minimize the sickness and deaths it has caused, but the statistics say that the common flu poses greater health risk.  This isn’t the black plague,” he said.

Terrill said the narrative of recent years has been about two markets, which he described as over-valued “glamour” tech stocks like Apple, Amazon and Tesla vs. more attractively priced value stocks like banks, airline and energy firms.

“Speculators ran the glamour names up to absurd levels. Now margin accounts are getting cash calls, and it is snowballing on the speculators who are being forced to sell holdings to raise cash. The selling pressure is taking down all stocks,” Terrill said. “For the glamour tech stocks, the pull-back has a long way to go. The value stocks didn’t participate in the upswing, but are suffering still the same. Their prices will stabilize and we’ll move in. Our list of good buys is getting longer.”

Michael O’Keefe, chief investment officer at Stifel: “First, while the number of cases continues to grow, the growth may be decelerating. This may be a signal of hope for containment. Second, the death rate appears to be about 3%, well below other coronaviruses of the past.

“A number of highly qualified research firms have attempted to qualify the economic impact of the coronavirus going forward. In summary, the range of GDP growth impact is 0.2% to 0.5% this year. But the studies acknowledge that it is too early to tell how much the disease will spread, and how long it will take to control it. So theses are just estimates off economic impact.”

Craig Fehr, an investment strategist at Edward Jones, said U.S. GDP Growth will likely drop below 2% this quarter for the first time since late 2018 as a result of the coronavirus’ impact on air travel, international business activity and domestic companies’ foreign production and sales in China.

“We doubt the growing risks related to the coronavirus outbreak will blow over immediately, so further volatility should be anticipated,” Fehr said. “But we also doubt this will permanently impair the broader fundamental backdrop of economic expansion and low interest rates, supporting the case for the bull market to persist as we advance through 2020.”

Ken Crawford, senior portfolio manager, Argent Capital Management: “Of course, we are watching what is going on with the outbreak and estimating how the virus might be affecting commerce worldwide and impacting individual companies. It is important to remember that we came into 2020 from a position of strength, with improvements seen across the globe. We will continue to use our investment process to guide us in making decisions on strategies we manage for our clients.”