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Jan. 29, 2020, 10:15 a.m. EST

Coronavirus shock could deliver double-digit hit to stock market, investor warns

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By Shawn Langlois, MarketWatch


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Chinese women and a child all wear protective masks as they walk under decorations in a park after celebrations for the Chinese New Year and Spring Festival were cancelled.

‘I don’t think we fully understand the scope of what’s going on with the coronavirus, I wouldn’t be surprised to see additional headlines come out that might shake the markets a bit.’

And by “shake the markets a bit”, Jeffrey Mills of Bryn Mawr Trust means a potential double-digit percentage drop in stocks.

“A 5% to 10% drawdown would bring us right around the upward sloping 200-day moving average [for the S&P 500] around 3,000,” he told CNBC in an interview this week . “In that case, we would be buyers.”

No such drop is taking shape Wednesday, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.68% building on prior session gains. The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.64% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.00% were hovering near breakeven.

But not so fast, Mills warned.

“I wouldn’t give the all-clear sign just yet,” he said. “The problem is in the very near term, what’s transpired over the last couple of days has not been enough to get rid of some of the overbought signals just from a technical perspective.”

Mills pointed out that the average peak-to-trough in any given year is about 12%, and he sees that as a real possibility.

Nevertheless, he’s still big-picture bullish.

“This is all happening within the confines of an ongoing economic expansion and an ongoing bull market,” he told CNBC.

Watch the interview:

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,386.98
+185.46 +0.68%
Volume: 323.72M
Aug. 6, 2020 5:08p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,349.16
+21.39 +0.64%
Volume: 2.41B
Aug. 6, 2020 5:08p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,108.07
+109.67 +1.00%
Volume: 3.75M
Aug. 6, 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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