With the recent carnage on Wall Street, CNBC Pro asks strategists and investors what’s next for stocks and where they see pockets of opportunity in the weeks ahead. US stocks briefly fell into the bear market on Friday, with the broad-based S&P 500 falling 20.9% from its all-time high in January at one point in intraday trading, before closing slightly higher. Nonetheless, the index recorded its seventh consecutive week of losses, its longest streak of decline since March 2001 as investors continue to be rattled by recession fears, inflationary concerns and expectations of an aggressive cycle of rate hike. But some market participants believe there are still opportunities for investors to selectively buy the dip. “The recent devaluation of equity multiples due to rising real rates may provide investors with a reasonable entry point given the tension in equity valuations over the past couple of years,” Marcella Chow told CNBC. Global Markets Strategist at JPMorgan Asset Management. She believes the information technology sector could provide opportunities for long-term investors, given moderating valuations in the sector and longer-term growth prospects. “The information technology sector is expected to experience strong earnings growth given the secular demand for software products and services as well as the continued demand for hardware,” Chow added. Todd Jablonski, Chief Investment Officer for Principal Global Asset Allocation at Principal Global Investors, believes that now is not the time to “run for the hills” despite the difficult environment. The company manages more than $700 billion as of March 31. “Equities have proven their resilience, and many investors have been surprised at how well stocks can withstand exogenous forces,” Jablonski said. Despite cheaper stock valuations, he warned that “returns will be tough” without the tailwinds of easy financial conditions and positive earnings growth. Jablonski said he preferred US stocks given their relative resilience to the Russia-Ukraine conflict and their fundamental economic strength. The importance of staying invested Thomas Poullaouec, head of multi-asset solutions for Asia-Pacific at T. Rowe Price, believes that an investor’s unique investment goals and horizons will determine their approach to equity markets. “For long-term investors like those planning for retirement, our research will show that it’s important to stay invested for the long term. While there will be periods of volatility like this along the way, establishing the proper asset allocation and diversifying their investments can help mitigate the impact of volatility on their portfolio,” Poullaouec said. He noted that the S&P 500 has seen double-digit annual losses for just 13 of the past 94 years through 2021. “While one-year returns can fluctuate widely, investors should keep in mind that stocks have never lost ground, double-digit or otherwise, over a period of 15 consecutive calendar years since 1928,” he said. “As a result, a long-term investor may feel more confident in holding onto their stocks, even if they experience short-term declines,” Poullaouec added. The asset manager s has highlighted selective opportunities that he believes are “deserving the attention of investors”. His fund increased its exposure to Asia ex-Japan to a slight overweight due to the importance of the reopening thesis in the region, where inflation is also “less of a concern” compared to other regions. according to Poullaouec. Australia is another “attractive market” due to its rising earnings outlook and “strong domestic demand”, he added. Read more Here are the ETFs that perform in this brutal year Strategists reveal how they trade tech stocks — and the same names keep coming up As stocks edge closer to the bear market, it will be the economy that decides where the Likewise, Michael Purves, founder and CEO of Tallbacken Capital Advisors, believes that if Microsoft and Alphabet are revalued amid rising interest rates, these stocks have “incredible” financial statements and cash balances. to help support earnings growth through equities. redemptions. Purves said he sees a lot of “tactical bounces” in stocks that have been “really battered” over the past two weeks. That includes high-quality small-cap mining stocks, he said. Purves also favors energy and materials stocks as a hedge against rising inflation.
A Wall Street sign is pictured at the New York Stock Exchange (NYSE) in New York, March 9, 2020.
Carlos Allegri | Reuters
With the recent carnage on Wall Street, CNBC Pro asks strategists and investors what’s next for stocks and where they see pockets of opportunity in the weeks ahead.
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