Elliott Management says stocks could plunge another 39% from current levels, according to new report

Carmen Reinicke

Apr 16, 2020, 20:41 IST

Elliott Management says stocks could plunge another 39% from current levels, according to new report

REUTERS/Steve Marcus

Stocks could fall 50% from February highs, the Elliott Management wrote in a Wednesday letter to clients, Reuters reported Thursday.
That forecast implies a 39% decline from current levels as investors continue to sort through the economic wreckage left by coronavirus.
Although Elliott has bought some stocks and bond, it says "there does not appear to be a gilded cornucopia of shining bargains," according to the letter.
Read more on Business Insider.

The market rout induced by the coronavirus pandemic is far from over, according to Elliott Management, the activist hedge fund firm led by billionaire investor Paul Singer.

Stocks could fall 50% from February highs, the hedge fund wrote in a Wednesday letter to clients. That would imply a roughly 39% drop from current levels. Reuters first reported the contents of the report on Thursday.

"Our gut tells us that a 50% or deeper decline from the February top might be the ultimate path of global stock markets," the letter reportedly said.

Elliott noted in the letter that the benchmark S&P 500 tumbled as much as 36% over a four-week period. That "provided a heavy bookend to a dozen years of basically nonstop positive returns in global stocks, bonds and real estate," it said.

The firm also mentioned the 31% rally from March lows leaves the S&P 500 still 16% below its February high. Against this backdrop, Elliott says it's bought some stocks and bonds, but has struggled overall to find attractively priced opportunities.

"There does not appear to be a gilded cornucopia of shining bargains," the letter said.

The firm is reacting to market whiplash that's been driven by uncertain around the ultimate impact of the coronavirus pandemic. There are currently 2,056,055 confirmed cases of COVID-19 in the world, and 134,178 people have died.

Data in the US and worldwide has shown that the outbreak and strict lockdowns to curb the spread of the disease have had a dire impact on the global economy. A recession is now a foregone conclusion to the majority of economists.

Elliott Management is known for its pessimistic economic views and ability to get ahead of looming downturns, according to the report. The hedge fund firm is based in New York and controls $40.4 billion in assets. The Elliott International fund gained 2.2% in the first quarter while its Elliott Associates fund was up 1.6%.