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 coming weeks. US stocks briefly slid into a bear market on Friday, with the broad-based S&P 500 index down 20.9% from its all-time high in January at one point in intraday trading, before closing slightly higher. However, the index recorded its seventh consecutive week of losses, the longest losing streak since March 2001 as investors continue to be weighed by recession fears, inflationary fears and expectations of an interest rate hike cycle. But some market participants believe that there are still opportunities for investors to buy the decline selectively. “The recent downgrade of stock multiples due to higher real rates may provide investors with a reasonable entry point given the extent to which stock valuations have stretched over the past two years,” Marcella Chow, global market analyst at JPMorgan Asset Management, told CNBC. It believes that the IT sector can provide long-term opportunities for investors, given moderation in the sector’s valuations and long-term growth prospects. “The IT sector should see strong earnings growth given the secular demand for software products and services as well as the continued demand for hardware,” Zhao added. Todd Jablonsky, chief investment officer for major global asset allocation at Principal Global Investors, believes it is not yet time to “run for the hills” despite the challenging background. The company manages more than $700 billion as of March 31. “Stocks have proven resilient and it has been surprising to many investors how resilient stocks are in the face of external forces,” Jablonsky said. Despite the stock’s cheaper valuations, he warned that “yields will struggle” without easy financial conditions and positive earnings growth. Jablonsky said he favors US stocks due to their relative resilience in the face of the Russia-Ukraine conflict and underlying economic strength. The Importance of Staying an Investor Thomas Polawiek, Head of Multi-Asset Solutions for Asia Pacific at T. Rowe Price, believes that an investor’s unique investment goals and prospects will determine his or her approach to equity markets. “For long-term investors such as those planning their retirement, our research will show that it is important to continue investing over the long term. While there are periods of volatility like this along the way, identifying an appropriate asset allocation and diversifying their investments can help mitigate of the impact of the volatility on its portfolio,” Polawiek said. He noted that the S&P 500 has suffered double-digit annual losses in only 13 of the past 94 years through 2021. “While one-year returns may fluctuate wildly, investors need to keep in mind that stocks haven’t lost steam,” he noted. Never, double – a number or otherwise, in any 15 calendar year period since 1928.” “Therefore, a long-term investor can feel more confident holding on to stocks, even if they experience dips in the short term,” Pollawek added. The asset manager highlighted selective opportunities that he believes are “worthy of investor attention”. His fund increased its exposure to Asia excluding Japan to a modest increase in weight due to the prominence of the re-opening thesis in the region, where inflation is also “less worrisome” relative to other regions, according to Bulawayk. He added that Australia was another “attractive market” due to rising earnings forecasts and “strong domestic demand”. Read More Below ETFs That Run Through This Tough Year Strategists reveal how they trade tech stocks – and the same names keep popping up as stocks approach a bear market, it will be the economy that decides where the sell-off ends. Similarly, Michael Purves, founder and CEO of Tallbacken Capital Advisors, believes that while the likes of Microsoft and Alphabet are reassessed on the back of higher interest rates, these stocks have “amazing” cash and equity balances to help support earnings growth through share buybacks. Perves said he’s seeing a lot of “tactical bounces” in stocks that have been “really battered” over the past two weeks. This includes high-quality small-cap mining stocks, he said. Purves also favors energy and materials stocks as a hedge against rising inflation.
An image of a Wall Street sign at the New York Stock Exchange (NYSE) in New York, March 9, 2020.
Carlo 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 coming weeks.
