It's been a disappointing day on the ASX today. The S&P/ASX 200 Index (ASX: XJO) gave up a 3% gain to finish the day down 2.02% to 5,076.8 points.
Whilst the ASX 200 has been highly volatile over the past two weeks, we have actually remained within a fairly tight band of between 4,750-5,200 points since March 16. After one of the best days in history for the ASX yesterday, many investors were no doubt hoping we've finally seen the bottom of this ASX 200 bear market.
But according to reporting in the Australian Financial Review (AFR), investment banking giant Morgan Stanley remains decidedly bearish on the short-term future of the stock market.
Although Morgan Stanley's analysts noted the risk of the global economy going into depression has considerably weakened, it was also noted that the market is pricing in a "short, sharp recovery" at the current levels – which may be misguided.
"Equities offer better long-term investment prospects, but we think economic disruptions will intensify and stocks could see further lows in the shorter term," the AFR quotes Morgan Stanley analysts as stating.
"Economic data has started to collapse: Flash PMIs have hit all-time lows, whilst weekly unemployment claims broke record highs in the US (+3.3 million). Moreover, most of the large economies have now moved to lockdowns as the new cases of Covid-19 continue to rise."
Could the ASX have further to fall?
Quite possibly. The stock market tends to be a forward-looking institution and will price things in as soon as they're clear. The problem is that the economic impacts of the coronavirus are not yet clear – both in severity and duration.
Therefore, I think the analysts at Morgan Stanley have a point and wouldn't be too surprised if their predictions come to pass.
In saying that, I still think it's a great time to be a long-term investor on the markets. History has shown that chasing the market down and then up is a bad idea, as there are almost invariable 'false recoveries' that come before the actual 'bottom' of a bear market is found. Trying to time these movements is a very fast way to lose money, in my view.
So I think if you stick to your favourite companies, and buy them when they're at a price you like, things will work out well in the long run! Not even the best investors in the world like Warren Buffett can time the exact bottom of a bear market, so I would suggest taking their lead in this matter!
