By Mark DeCambre, MarketWatch
The breadth and intensity of this week’s coronavirus-fueled selloff in U.S. stocks has some analysts scratching their heads.
Thomas Lee, founder of Fundstrat Global Advisors, may be one of the few to acknowledge that something isn’t right with a market that was just enjoying a record close days ago.
“This is not normal, and the market is clearly indicating to us a change,” Lee said in a research report on Friday.
Lee said the oddities playing out in the market, including two and potentially three days of 1,000-point drops in the same week for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.62% , signifies four things (though his tongue may be planted firmly in his cheek on the last item):
A significant change in economic fundamentals
A significant increase in ‘risk’ to the fundamentals
The market’s financial plumbing is breaking down
A meteor or alien invasion to end global existence has been spotted but its arrival is unknown (or a virus pandemic)
At last check, Dow Jones Industrial Average was closed down more than 360 points Friday, and the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.36% was off less than 0.8%, while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.35% finished the session virtually unchanged. Still, the three major benchmarks notched their worst weekly declines since the 2008 financial crisis.
Investors are worried that the outbreak of COVID-19, the infectious disease that originated in Wuhan, China, late last year, will hurt global economies and supply chains if the illness isn’t contained.
Lee said fear surrounding the uncertain impact of the virus is a credible issue but added that he believes investors may be overreacting. “Because of the idiosyncratic nature of a potential pandemic, it is really difficult to know when it is priced in," he said.
He made the case that “markets are bottoming this week” even heading into a weekend where uncertainties could deliver a fresh wallop to confidence. He is forecasting a so-called “V”-shaped, or sharp, recovery for the market.