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Feb. 1, 2020, 9:24 a.m. EST

The stock market’s biggest problem this week isn’t the coronavirus or Mideast tensions, strategist warns

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By Shawn Langlois, MarketWatch


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Coronavirus is scary, but one strategist says investors have a bigger worry.

‘My guess is if we’re going to rationalize a market that’s pretty stretched right here, it’s going to happen right now. We have about a third of the S&P 500 reporting. We’re going to see the losers lose a whole lot more than we’ve seen in a while. The index itself could probably pull back 3% to 5%.’

That’s longtime stock-market bull and National Securities chief market strategist Art Hogan offering up his bearish stance in a CNBC interview ahead of what looks to be a very busy week of trading.

Hogan said the S&P 500 could see a pullback of as much as 5% — and it won’t be because of the coronavirus or rising tensions with Iran.

“Stocks are relatively priced for perfection, and you tend to have a bit of an overreaction to bad news or in-line news when that happens,” he continued.

With a crowded slate of earnings on tap, Hogan warned that it will probably be the biggest winners getting the biggest haircuts.

“There are five technology names that are driving a good chunk of the movement in the S&P. On the other side, you see the utilities index,” he explained. “The index is trading at 25 times and it’s throwing out a dividend that’s less than 3%. Both of those numbers are historically stretched. This is an index that usually trades at 16 times and has about a 5% dividend.”

Apple /zigman2/quotes/202934861/composite AAPL -4.75%  , which reports on Tuesday, is one of those big tech names. The stock has more than doubled over the past year amid optimism about new services like streaming video and the potential for a wave of iPhone upgrades later this year. Tesla /zigman2/quotes/203558040/composite TSLA -7.46% is also on deck this week.

Hogan, however, isn’t completely bearish on the future, even though he says his cash levels are higher than normal. He said he sees the next pullback on the S&P as a big buying opportunity for investors.

Watch the interview:

Hogan’s call for a rough week is looking prescient so far, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.56% , S&P 500 /zigman2/quotes/210599714/realtime SPX -3.35% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -3.71% all getting hit hard in Monday’s session.

/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 298.18
-14.87 -4.75%
Volume: 55.54M
Feb. 24, 2020 4:00p
P/E Ratio
23.55
Dividend Yield
1.03%
Market Cap
$1369.74 billion
Rev. per Employee
$1.98M
loading...
/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 833.79
-67.21 -7.46%
Volume: 15.19M
Feb. 24, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$166.13 billion
Rev. per Employee
$439,627
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,960.80
-1,032 -3.56%
Volume: 458.71M
Feb. 24, 2020 5:04p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,225.89
-111.86 -3.35%
Volume: 2.75B
Feb. 24, 2020 5:04p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
9,221.28
-355.31 -3.71%
Volume: 2.75M
Feb. 24, 2020 5:16p
loading...

Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.

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