Coronavirus makes these market sectors a 'death trap': Minerd

The S&P 500 may fall another 39% from here

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The COVID-19 pandemic may have delivered a death blow to companies in the hardest-hit corners of the stock market, according to Scott Minerd.

“It’s really difficult to try to buy the stuff that’s really been hammered,” the managing director and global chief investment officer at Guggenheim Partners, which oversees $270 billion in assets, told FOX Business’ Maria Bartiromo on Thursday. “The hospitality stocks, the airline stocks, these could be a death trap. Some of them may never come back.”

Travel has ground to a near standstill in the U.S. as the pandemic forced states to issue “stay-at-home” orders and enforce social-distancing guidelines. The airlines and hospitality industry groups have seen their values fall by 57 percent and 41 percent, respectively, since the virus was first reported in the U.S. on Jan. 21.

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Small-cap domestic stocks are one area of the market where Minerd is looking for opportunities. He says investors can “start nibbling, not gorging” on some names, though he expects the market to take another swing lower.

“We need to see the other shoe drop when the market starts to see some of the data on unemployment and economic growth contracting,” said Minerd. "I think there will be another level of panic in the markets.”

Minerd predicts S&P 500 earnings of about $100 a share this year, which he says would put the index at about 1,500, or 39 percent below where it settled Wednesday.

Instead of focusing on stocks, Minerd suggests investors are better served looking at the bond market.

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“At this point, we're opportunistically trying to move from some of our more conservative investments to things that look attractive, particularly in areas like investment-grade corporate bonds and municipal bonds,” he said.