Many ASX investors will be watching the S&P/ASX 200 Index (ASX: XJO) gain 2.53% today (at the time of writing anyway) with a sigh of relief in tow. It's a very positive move for an index that's already had a pretty good week so far.
Including today's moves, we are now up 22% from the lows we saw in late March – an extraordinary rally when you put it in perspective.
But a US-based hedge fund manager is telling investors not to pop the corks too soon.
According to reporting in the Australian Financial Review (AFR), Elliott Management (founded and run by billionaire Paul Singer) is warning that global markets could tumble further from here, possibly up to 50% from the highs that we saw back in February.
"Our gut tells us that a 50 per cent or deeper decline from the February top might be the ultimate path of global stock markets," the AFR quoted Elliott as stating.
It's a bleak outlook for both ASX shares and global markets. There is little possibility that the ASX would avoid a nasty decline if the US markets dropped this low, as Elliott says is possible.
How do ASX investors respond to these dire predictions?
These are bleak predictions, to be sure. But as always, I think ASX investors should be prudent with their capital and aim for quality at a decent price during these uncertain times. That's the playbook of the world's greatest investor Warren Buffett, and it has worked for him over decades of investing.
If you're not so wild about shares, Elliott Management states that gold is also an avenue to examine going forward for its 'safe-haven' status as an investment.
However, I think ASX shares should still be on the horizon for most investors. History shows that the innovation and strength that our ASX companies possess are a powerful force for long-term wealth creation, both in good times and bad. The ability of a good company to compound its earnings and generate prosperity is unrivalled amongst different asset classes, in my view.
Yes, we have been through a rough ride in the share market as of late, and I don't think this is over either (despite today's positivity). But over the long-term, we will get past the coronavirus, and the ASX will make new highs. It's always happened this way, and (I suspect) always will. We just don't know how long it will take this time!
