Buy the dip or time to sell stocks? Here’s what Wall Street experts say
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CNBC Pro quizzes Wall Street’s analysts and investors about the next steps for stocks. They also ask them where they see opportunities in the week ahead. U.S. stocks briefly fell into bear market on Friday, as the broad-based S & P 500 fell as much as 20.9% from its all-time high in January at one point in intra-day trading, before closing slightly higher. The index lost its seventh consecutive week, which is the longest losing streak since March 2001. Investors continue to be whippedsawed by inflationary worries, recessionary fears and expectations for a rate hike cycle. Some market participants believe there is still an opportunity for investors to buy the dip selectively. Marcella Chow (global market strategist, JPMorgan Asset Management), stated that the recent de-ratings of equity multiples as a result of higher real rate may offer investors an acceptable entry point considering how stretched equity values have been in the last two years. Given the moderate valuations of the sector, and the longer-term growth prospects, she believes that the opportunities in the information technology sector may be attractive to long-term investors. Chow stated that the sector’s earnings should grow due to continued demand for both software and hardware products. Todd Jablonski is the chief investment officer at Principal Global Asset Allocation, Principal Global Investors. He believes that it’s too late to run for the hills despite the difficult backdrop. It has a total assets of more than $700B as of March. 31. Jablonski explained that stocks have shown their resilience. It’s not surprising for investors to see how resistant they can be to external forces. Jablonski warned, even though equity valuations are cheaper, that returns will be difficult without the support of strong earnings growth and easy financial conditions. Jablonski indicated that U.S. stocks are his preferred choice due to their economic fundamental strength and relative resilience to Russia-Ukraine conflict. Important to stay invested Thomas Poullaouec is the head of multi-asset strategies for Asia-Pacific at T. Rowe Price. He believes an investor’s investment goals and outlooks will dictate their approach to stock markets. Our research shows that long-term investors, such as those who are planning to retire in the future, should keep their investments going for the long-term. Poullaouec explained that there may be volatility in the future, but proper asset allocation and diversification of investments will help to reduce volatility. He noted that the S & P 500 has experienced double-digit annual losses in just 13 of the last 94 years through 2021. He stated that although one-year return may be volatile, investors must remember that stocks never lost ground double-digitally or otherwise in any period of 15 years since 1928. Poullaouec explained that long-term investors can be more comfortable holding stocks, even in the face of short-term declines. Poullaouec highlighted some opportunities that are worthy of attention as an asset manager. Poullaouec says that the fund’s exposure to Asia ex Japan has been increased to a small amount. The reason for this is the importance of the “re-opening thesis” in Asia. There, inflation is less of a concern than other regions. Australia, with its growing earnings and solid domestic demand is another market that is “attractive,” he said. Read more Here are the ETFs that are working during this brutal year Strategists reveal how they’re trading tech stocks — and the same names keep coming up As stocks edge near bear market, it will be the economy that decides where the sell-off ends Likewise, Michael Purves, founder and CEO of Tallbacken Capital Advisors, believes that while the likes of Microsoft and Alphabet are being revalued against the backdrop of rising interest rates, these stocks have “amazing” financials and cash balances to help support earnings growth through share buybacks. Purves says he is seeing a lot more “tactical bounces,” in stocks that have been “really battered up” the last few weeks. These stocks include high-quality small-cap mining stocks. As a hedge against inflation, Purves favors stocks of energy and materials.
An image of a Wall Street sign at New York Stock exchange (NYSE), New York, March 9, 2020.
Carlo Allegri | Reuters
CNBC Pro asked strategists and investors about the future of stocks in light of the latest Wall Street chaos. They also sought out opportunities for the coming weeks.
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