DRIP Expert Stays Bullish

03/06/2020 5:00 am EST

Focus: STRATEGIES

Charles Carlson

Editor, DRIP Investor

During tumultuous market periods, I always find it of great value to take a step back from the upheaval and take a macro view of things, Chuck Carlson, long-term dividend expert and editor of DRIP Investor.

And when you start thinking about the macro view of the market, you have to consider the three main engines of sustained stock market moves:

Interest rates:

The interest-rate environment remains very conducive for stocks. And my guess is that the Fed will remain very accommodating when it comes to interest rates in light of the fears of what the coronavirus can do to the global economy. Bottom line — bullish for stocks.

Inflation:

Inflation remains fairly under wraps, which is a positive for stocks. Bottom line - bullish for stocks.

Corporate profits:

This is really the big question. It is certain that the coronavirus is impacting the global economy, which will impact corporate profits. What is uncertain is how much the current market decline has already discounted that weakness in corporate profits.

Has it discounted 50% 75% 125% (In other words, an overreaction)? My feeling is that corporate profits will hold up better than expected, which puts corporate profits worst-case in the neutral camp. Bottom line - neutral for stocks.

Thus, my feeling is that the current decline represents a secondary correction within an ongoing bull market. Secondary declines are violent and abrupt, but not usually long-lasting -- three weeks to three months. I think this will be on the shorter end of things.

True, it is probably a fool's errand to say that the market has bottomed. But I think the bulk of the damage has already been done.

Investors with cash should consider nibbling on quality stocks at this time. Some names to consider include JP Morgan (JPM) and Microsoft (MSFT). Both offer direct-purchase plans whereby any investor may buy the first share and every share directly from the company.

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