A V-shaped market recovery following COVID-19 is less likely than “rolling Ws”, says Liz Ann Sonders, Chief Investment Strategist at Charles Schwab.

Sonders recently shared her thoughts on the COVID-19 market performance and outlook via an article on the Charles Schwab website. 

Disconnect between the share market and economy  

Sonders stated that the No. 1 question she is fielding lately relates to the “disconnect between the stock market and the economy.” 

Certainly, the disconnect is present in the Australian share market too, with the Australian Financial Review (AFR) reporting on 3 June that the ASX 200 remained “unfazed by recession talk as it hit a three-month high.” 

The market participants’ rose-tinted outlook prompted JPMorgan Asset Management’s Global Market Strategist, Kerry Craig to infer that, “if the economic data remains weak for the moment, markets are likely to continue to discount that as being backward looking.” 

However, Craig identified a risk; that markets are “pricing in a lot of good news that might not materialise in the second half of the year.” 

Indeed, the S&P/ASX 200 Index (INDEXASX: XJO) is currently trading largely flat, with Victoria reinstating certain restrictions amid second-wave fears. 

Related to Craig’s worry, Sonders stated that second half will grant: “clarity on the depth of the economic contraction via both the second quarter earnings season… and the initial read on second quarter real gross domestic product.”  

The upcoming earnings season and updated gross domestic product figures may very well send the markets on a W-shaped rollercoaster. 

Shares lead the economy

Investigating recession data post-Second World War, Sonders found that, with the exception of 2001, “the stock market’s peaks and troughs have pre-dated the economy’s peaks and troughs.” 

Sonders further stated that there is a “fairly consistent history of the stock market’s peaks and troughs coming at or before the peaks and troughs in the economy.” 

This, for Sonders, confirms the view that “the stock market is a leading economic indicator.” 

Sonders also mused that she will closely monitor investor sentiment, “near-term market peaks and troughs are often defined more by investor emotions than economic data.” 

Takeaways for ASX 200 

NAB’s own CEO, Ross McEwan echoed Sonders’s thoughts on the shape of the recovery, with the AFR releasing an article titled: “McEwan backs more stimulus, tips W-shaped recovery.” 

A W-shaped recovery will require a more circumspect investing approach and a sturdy constitution to handle the likely-lively ride ahead. 

In an important caveat, JPMorgan’s Kerry Craig offered the following:

“If we’re heading for weaker growth and lower inflation, investors need to look for companies that can protect margins long-term, hence security selection is more important right now than the top down macro narrative.”

Sonders herself concluded that “the stock market probably got a bit ahead of itself in pricing in a V-shaped recovery.”

The positive news about flattened curves across the globe and encouraging headlines regarding vaccines may have spurred the V-shape recovery thesis. 

Therefore, Sonders thinks that “stocks may continue to be at the mercy of virus-related news — in both directions.”

More reading

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• Ready to invest $5,000? I’d buy these ASX dividend shares today
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 finishes higher, Woolworths gives update
• Invest like Warren Buffett by buying and holding these ASX 200 shares

Motley Fool contributor Kiryll Prakapenka has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Alphabet soup: Is the ASX 200 in for a V-shaped COVID recovery or rolling Ws? appeared first on Motley Fool Australia.

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2020 has been a crazy ride for many ASX 200 share investors.

The S&P/ASX 200 Index (ASX: XJO) is down 10.6% in 2020 thanks largely to the steep bear market over February and March. 

It’s true that investing in the share market isn’t for everyone. There are a lot of factors that should be considered before diving into ASX 200 shares and one of them is time.

I believe if you’re not investing for at least the next 7 to 10 years, it may not be wise to buy right now.

But if you’re looking to invest for the next decade or more, here are a few shares I would buy with $10,000 today.

Where to invest $10,000 in ASX 200 shares for 2030

I like a couple of blue-chip shares in the current market.

The first one I’m looking at right now is Fortescue Metals Group Limited (ASX: FMG).

The Fortescue share price is up 32.7% this year and more than 600% in the last 5 years.

The Aussie iron ore miner could be set for a big decade of growth in the 2020s. I think a strong relationship with China and growing sales to India could be the key to success for Fortescue in the decade ahead.

Combine this with a potential infrastructure boom in the short to medium-term, and Fortescue is one ASX 200 share definitely worth watching right now.

A2 Milk Company Ltd (ASX: A2M) is another ASX blue-chip on my radar.

Just like Fortescue, this dual listed dairy share has seen strong growth over recent years. In fact, the A2 Milk share price has rocketed 26% higher in 2020 alone.

A2 Milk is looking to expand internationally and not just throughout Asia. On top of the lucrative Chinese market, the company is looking to establish a foothold with the brand in Canada.

If A2 Milk can execute on its strategy over the next 10 years, I think it could be worth much more than its current $13.4 billion valuation.

But, it’s not only the blue-chips that I’ve got my eye on. I also like the look of ASX 200 growth shares like Xero Limited (ASX: XRO).

Xero is a leading accounting software provider that targets small and medium enterprises (SMEs). More innovation and a rise in small business participation could be a good thing for Xero sales in the coming years.

If Xero can continue its market domination, then who knows where this Aussie tech share’s price will be in 10 years’ time.

More reading

• Alphabet soup: Is the ASX 200 in for a V-shaped COVID recovery or rolling Ws?
• Ready to invest $5,000? I’d buy these ASX dividend shares today
• How ASX 200 shares like Xero could help you retire early
• Best growth shares to buy with $4,000
• 5 things to watch on the ASX 200 on Wednesday

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where to invest $10,000 in ASX 200 shares for 2030 appeared first on Motley Fool Australia.

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