The American markets have not evaluated the second wave of coronavirus: Citi Private Bank

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Traders work before the closing bell at the New York Stock Exchange on August 14, 2019 in New York.

JOHANNES EISELE | AFP | Getty Images

Major US stock indexes may have recovered from their recent lows, but Citi Private Bank warned on Monday that the worst may not be over.

“In the event that we have a second very serious wave of illness in the United States that results in a further downturn in the economy … which is clearly not integrated into the market,” David Bailin, chief investment officer of the bank. “Squawk Box Asia. “

“The other thing that may not be on the market is the fact that it can take another 18 to 24 months to really travel the world and ultimately get a vaccine,” he added.

In the second quarter, we expect profits to drop literally 40% or more across the board.

David Bailin

Citi Private Bank

The coronavirus pandemic has infected more than 2.4 million people worldwide, with the United States reporting the highest number of cases in the world – around 760,000, according to data compiled by Johns Hopkins University.

The rapid spread has prompted U.S. states to impose varying degrees of foreclosure, which has pushed up unemployment as businesses struggle to stay afloat.

Purchase opportunities

Given that the pandemic could extend much longer, Mr. Bailin said he had “significantly” lower expectations for corporate profits than most analysts. He said the extent to which the coronavirus pandemic hit businesses in March “would hint” at what will happen in the coming quarters.

“In the second quarter, we expect profits to drop literally 40% or more across the board, and we do not expect US profits to return to first quarter levels in nine quarters “, did he declare.

This does not mean that investors should stay out of the US financial markets. Instead, Bailin said there are good market opportunities in the United States.

The IOC said that for equities, US financial institutions have weathered the crisis strongly. In the bond sector, several high-yield stocks outside of the energy sector appear to be “highly rated” and “the top end” of the investment grade segment still appears to be “very attractive,” he said.

“I think there are a lot of places to look for the return and I think it is important that investors look for the return now because after the crisis is over – in six months, 12 months, 18 months from now – I expect these spreads on these retirement bonds to be definitive, “he said.

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