How to position yourself as the bull market beckons
Markets / August 4, 2022 / Admin / 0
Asset manager Dan Veru thinks US equities could suffer a sustained decline, before embarking on a “powerful rally” by the end of the year. A broad rally in US equities in July had raised hopes of a sustained stock market rebound. Speaking on CNBC’s “Squawk Box Europe” ahead of the start of Monday’s US trading session, Veru attributed July’s strong results to better-than-expected earnings and “acceptable” guidance for the third quarter. Veru, who is chief investment officer at Palisade Capital Management, said he expects the recent bear market rally to continue as more companies signal it. All three major US averages closed higher on Wednesday, ending a 2-day losing streak. The Dow Jones Industrial Average rose more than 400 points, while the tech-heavy Nasdaq Composite jumped about 2.5%. The broad-based S&P 500 hit its highest level since June. ‘Powerful’ end-of-year rally Veru thinks the stock market remains macro and could still experience further volatility before the end of the year. “As the fall approaches, I think equities could be vulnerable to a new selling cycle. The fall is typically a time of weakness for equities, but I fear the full force of rising rates will interest rate and quantitative tightening by the Federal Reserve cannot create a new selling cycle,” Veru said. He noted that the full impact of inflationary pressures and the series of interest rate hikes this year will be felt this quarter, which will translate into “greater uncertainty” for third quarter earnings.” In addition, the upcoming U.S. midterm elections, high energy prices and supply chain issues could create enough uncertainty to weaken equities. I’m not sure US stocks will hit a new low, but much of the recent gains could be lost before November 2 [congressional] elections,” he added. Still, Veru predicts a “powerful end-of-year rally” for stocks after the fall selloff. Commodity prices should begin to decline. By the end of the year, a new bull market should begin to take us into 2023 and beyond,” he said. Sectors to Hold How should investors position themselves in this environment? Energy is by far the best performing sector in the S&P 500 this year, having gained more than 40% since the start of the year, according to data from FactSet.Read more Wall Street pros say these small caps are good buys as recession looms – BofA gives 40% hike These stocks are poised to come back if inflation peaks, says Jefferies Has the market bottomed?Here’s what Wall Street has to say after US stocks rebounded in July But the sector only returned 5.6% in the past month – so underperforming consumer discretionary, technology and industrials – amid falling crude oil prices and growing recession fears. With the US dollar having “probably peaked” in the near term, Veru says this bodes well for industrial and commodities stocks. , he believes the outlook for the industrials sector is “fairly good” while valuations also look more attractive. He is also a fan of the health sector given his “defensive characteristics”. The sector is down 6.3% this year, outperforming the S&P 500, which has lost nearly 14% of its market capitalization this year. Palisade Capital Management manages over $5 billion in assets at the end of 2021.
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Dow Jones Industrial Average, DXY US Dollar Currency Index, economic news, Investment strategy, NASDAQ compound, S&P 500 Index
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