By David Randall

NEW YORK (Reuters] – U.S. stocks continue to attract buyers after a tumble in recent months, however some investors think that this is a riskier time than the past.

After a quick rebound from the lows of this week, 8.5% was seen in the benchmark. This happened after markets were already nervous about the impact of Russia’s attack against Ukraine.

After several weeks of warnings by Western leaders, Russia launched a triple-pronged attack against Ukraine on Thursday. It was the largest assault on an European state since World War Two and threatened to disrupt the post-Cold War order across the continent.

In response, the United States imposed sanctions against Russia targeting important banks as well as members of its elite and new export control measures.

Buying stocks during declines was a rewarding strategy for market participants during the S&P’s more than 200% run over the last decade, and the recent tumble has been the biggest since the index lost nearly a third of its value in the COVID-19 selloff of March 2020 – which itself proved to be a tremendous buying opportunity.

Yet while bargain hunters over the last two years could count on the Fed’s historically loose monetary policy to offer stocks support, today they face a central bank that is expected to pull out the stops in its fight against inflation – starting with a widely anticipated rate increase this month.

The Fed supported investors so they were trained to purchase the dip. Burns McKinney is a senior portfolio manager for NFJ Investment Group.

Hayman Capital Management’s founder and chief investment officer, Kyle Bass believes that investors have not considered all possible outcomes. This includes a long conflict which could lead to Russia invading Ukraine. It would also impact global growth.

He said that things would get worse “before they got better” in a recent interview with Reuters. This is not the outcome that asset managers can envision.

Bass stated that investors need assets that are resilient to inflation, like commodities or real estate.

McKinney has been buying dividend-paying stocks he believes will withstand market volatility, and putting some money in defense companies.

In addition to the fast-moving situation in Ukraine, investors next week will be watching Friday’s non-farm payrolls data for February – the last such employment report the Fed will see before its monetary policy later this month. Markets are anticipating a rise in interest rates from near-zero levels to 1.79% next February, according to Jerome Powell, Fed chairman. [FEDWATCH]

Despite Ukraine being in turmoil, people who favor buying stocks on weakness claim that past geopolitical events and stock drops have not been long-lasting. LPL Financial’s (NASDAQ:) study of 37 important geopolitical developments since World War Two revealed that stocks rose on average by 11% one year after the event, providing that a recession doesn’t occur.

BlackRock (NYSE 🙂 added to its strategic overweight of equities earlier this week, arguing that investors might underestimate the need for hawkish central bankers to fight inflation. JPMorgan’s analysts argued that initial volatility over rate hikeoff wasn’t sustainable and equities hit new record highs 2-4 years later.

Valuations on the S&P 500 stand at a forward price to earnings ratio of 19.4, compared to 22.1 at the beginning of the year, bolstering the case for stocks’ attractiveness to some investors.

However, others are more pessimistic, with the market pricing in Fed tightening next February to counter soaring inflation.

BofA Global Research’s analysts stated that “we are bearish”, in a recent memo. They believe that the current “bull era (of central bank excesses, Wall St. inflation(and), globalization) is ending” and will be replaced with a new “bear age” of inflation. The analysts advised investors not to buy during rallies in the market.

Charles Lemonides (portfolio manager for hedge fund ValueWorks LLC) has been increasing his odds against certain stocks such as Broadcom (NASDAQ;) Inc and Beyond Meat (NASDAQ.) Inc. These bettors are skeptical that the markets can sustain a rally in face of a hawkish Fed.

His words were: “The truth is that the market had experienced an enormous run, and you inevitably give back some gains.”