Market Watch: 'No safe harbour' as shares slump...and is it too soon to buy the dip?

There's "no safe harbour" for investors right now as markets slump, says Pie Funds chief executive Mike Taylor.

Wall Street sharemarkets fell heavily again this morning with the tech heavy Nasdaq index off 5 per cent - its biggest fall of the year.

That comes after what had already been a rough month for investors.

"April was really a tough month there's literally nowhere to hide, no safe harbours," Taylor told Market Watch.

"The S&P500 was down about 9 per cent, the Nasdaq had its worst month since October 2008 that was off 13 per cent. Bonds in many cases had the worst month on record as well, so really there was nowhere to go, nowhere to hide."

The stocks that had driven markets for the last decade or so were the big tech stocks or FAANGs (Facebook, Apple, Amazon, Netflix and Google), Taylor said.

Those had held up well until this last month when we saw Apple down, Netflix was down another 50 per cent this month, even Tesla fell more than 20 per cent for the month.

"So where we thought we could previously hide, now investors can't hide and they can't necessarily buy the dips in those in those names; so a very challenging time."

"I would be cautious on the buying at this particular point," Taylor said.

"You know a good time to re-enter the market has, over the past decade, proven to be when central banks change their view on interest rates."

That happened in early 2009, in 2012, in 2018 and again in 2020.

"We were not seeing it change, now central banks are still aggressively hiking rates and continue to want to get a handle on inflation," he said.

"So until we see a change in view there, I don't think it's necessarily time to be aggressively buying stocks."

The big issue remains inflation and the situation in China had further complicated things, he said.

"The zero-Covid policy is adding further disruption to the global supply chain. Just at a time when we thought perhaps we'd be getting over those problems it looks like that's going to be around for a little bit longer again."

The issue was how China dealt with Covid from here and whether it will cause an economic slowdown or potentially could push them back into recession.

But that was not something that the regime wanted, so they had already announced that they might unleash a new stimulus package.

"The size and extent to that stimulus package will be important, particularly for commodities," Taylor said.

"If it's a large package, similar to what they've done in the past, where they go out and do an infrastructure spend, we would see commodity prices further boom, which is unfortunately not good for inflation."

The other issue weighing on markets was that as economic growth slowed consumers might start to spend less. That was flowing through to earnings expectations.

So in the short term caution was advised for investors, Taylor said.

"I would not be rushing out to buy dips in the market at this point. And really keep an eye on what the Fed says."

- The Market Watch video show is produced in partnership with Pie Funds.