Have the markets bottomed and is it safe to buy? Experts weigh

A recession? Don’t tell the stock market that. Major averages ended positive for the week. This came after the best month for the S&P 500 (^GSPC) since November 2020.

Granted, the Nasdaq Composite (^IXIC) is still down 20% year-to-date and the S&P 500 is 13% in the red. But the recent market rally has some investors wondering if we are seeing a turning point and whether it is safe to buy.

Continuing our “What to do in a bear market” series, Yahoo Finance asked the experts.

Have the markets bottomed out?

Permabull Tom Lee, co-founder and head of research at Fundstrat recently told investors that “the bear market of 2022 is over”. He says markets could reach new highs before the end of the year.

Meanwhile, Rich Ross, Senior Managing Director of Evercore ISI, says we may be looking at a cyclical bull market.

“Look, I’m not saying today is the first day of the next big secular bull market. But I’m telling you we’re probably in a cyclical bull market now,” Ross said.

“The bear market that started in January, February at the index level is over. The lows are here. And we should now be buying dips rather than selling tears, as has been the case for the past six months,” he added. .

“When you think of an S&P that peaked around 4,800, I think 4,600 is a realistic upside target. I think 15 and the change on the Nasdaq 100 (^NDX) is a realistic upside target. are levels worth playing,” he added.

Rebound ?

Others are calling the recent rise a bearish rally or a rebound.

“I think it’s nothing more than a bear market bounce. We had the same thing in March,” Oxbow Advisors managing partner Ted Oakley recently told Yahoo Finance Live.

“It seems very normal. You get these all the way. We don’t see anything that would make you believe, even remotely, that we are in a new bull market here.

The economic impacts of a global slowdown have not yet fully manifested, says Ann Berry, founder of Threadneedle Ventures.

“I don’t think we’re close to the bottom yet. And the reason for that is that we haven’t really seen the full impact of what the global slowdown is going to do to the US economy,” Berry said in a Yahoo Finance Live interview recently.

“If we look at the S&P 500, we know that around 40% of the revenue represented by the companies in this index comes from international markets which are currently suffering a double whammy. The stronger US dollar and the fact that global demand is slowing, so the volumes are going to be altered,” she added.

Traders work on the floor of the New York Stock Exchange in New York, Wednesday, July 27, 2022. (AP Photo/Seth Wenig)

Traders work on the floor of the New York Stock Exchange in New York, Wednesday, July 27, 2022. (AP Photo/Seth Wenig)

Should investors buy now? And if so, what?

Speaking of companies that can ride out recessions, Berry noted, “What I’m trying to do is consolidate positions in companies like JNJ (JNJ), companies like Walmart (WMT).”

“That’s what I’m a fan of, where I think we’ve seen cracks in valuation out of proportion to the stability of these companies, and to going through a recession and coming out of this stronger. other side,” she added.

It’s impossible to time the bottom of a bear market, wrote Megan Horneman, chief investment officer at Verdence Capital Advisors, in a recent note to investors.

“While several capitulation indicators (e.g. sentiment) suggest the worst is behind us, we are cautious that we will see another leg lower as potential earnings growth becomes more realistic,” he said. she warned.

“However, for investors who have liquidity on hold, it is recommended to add gradually as we navigate the bottom of this bear. Especially in areas that may have already priced in the peak of pessimism and have already seen earnings estimates adjust accordingly (e.g. small and mid caps),” added Horneman.

Mona Mahajan, senior investment strategist at Edward Jones, told Yahoo Finance Live that a longer-term rally will require getting inflation under control.

“If we start to see inflation seriously reversing, you know, call it two, three, maybe and four lower inflation readings, that’s when we might really see, you know , the Fed will start in earnest not only to move at a more gradual pace, but maybe approve a pause or more.And that’s when we believe equities, and markets in general, will support or mount a more sustainable rally. That’s when you may start to see the growth segments of the market accelerate. So we would say now, defensively oriented and tilted,” she said. declared.

“But if we gradually start to incorporate some of that growth as a drag or supplement to your defensive positioning in the coming months, that’s a really nice portfolio that could be put together well as we enter the second half of this year in 2023,” she said.

A return to June lows, and even lower, is possible, says Mike Wilson, equity strategist at Morgan Stanley.

“We think the June lows are vulnerable at the index level,” Wilson told Yahoo Finance Live on Friday. “We think those June lows will be removed at the index level. But at the stock level there are probably many stocks that have already hit that June low and that’s the name of the game – we’re trying to choose the right places to be.”

Wilson went on to say, “What I would suggest to listeners is that you wait for this retest in the fall as the numbers come down and we cross the old lows, around 3,500 maybe. [on the S&P 500]. This is where you start to start accumulating. Because that next low will be the most durable, which we think could really lead to the next bull market which could be as early as next year.”

Will investors know when they see the truth capitulation?

“Keep in mind that the latter part of these bear markets is usually the most vicious, because you finally get that capitulation that you really haven’t seen yet,” Wilson said.

“We saw sales of course in the spring. People were a little bearish, but we didn’t see any real fear. We’ve seen people a bit more restless – and irritable at the thought of losing money. But not really afraid. And I think it still happens,” he added.

Capitulation happens when we stop asking about it, Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance Live recently.

“We haven’t given up hope,” Sosnick noted, as people still wonder when is it time to buy stocks.

“Real surrender happens when people say, ‘Oh my God. I don’t – don’t even talk to myself about it anymore,’” he said.

Ines is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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