It's the day after the Fed's surprise rate cut. Recession worries haven't gone away. The stock market isn't any calmer. And investors are wondering just what happens next.
CNBC asked the pros on how to survive and maybe even profit from this kind of market. Here's what they had to say.
Making $ With Financials
"We like the financials. We've liked the financials since they started to show weakness. We believe that, obviously, the lowering of the Fed rates makes borrowing money cheaper. It allows them to go out and incorporate some more loans. We think there's more money to be made there. We definitely think that some of them are well oversold. We like the strong, solid money centers like JP Morgan , for example, but we do like the sector overall, as long as you stay away from the prime subprime lenders."
Todd Sherman, RF Lafferty VP of Private Client Group
Betting on Homebuilders
"The [homebuilders] we would be buying today are Toll Brothers , Ryland , D. R. Horton and also MDC Holdings . All these have strong balance sheets, they have experienced managements, they didn't pay dearly at the end of the peak of the housing market, so they have cash to go to market, to buy land at a much cheaper price during the next 12 months."
Kenneth Leon, Standard & Poor's Homebuilders Analyst
Don’t Try To Be Hero
"We probably have a few months ahead of us before this begins to turn, though this market is clearly, especially at this interest rate level, is fairly undervalued. And it’s a time for people not to panic, to be conservative, don’t try be a hero, be diversified, but start to pick off some good stocks in some sectors that have been beat up on.”
Dan Genter, RNC Genter Capital Management
Bank on Banks
"We think it's [People's United Financial] going to be one of the next bank stocks that gets added to the S&P 500. We think it's very well managed. They've got a trophy franchise, one of the best franchises in Fairfield County, Connecticut. They also recently completed a merger with Chittenden Bancorp, and we think there are going to be great synergies from that merger, good earnings-per-share growth...they really have no exposure to the problems of today. They don't have SID exposure. They don't have subprime exposure. The management team a while ago decreased the size of their bond portfolio, and so we think they are very well positioned."
Thomas Michaud, Keefe Bruyette & Woods Vice Chairman & COO
Play Strong Sectors
"We still like energy, we like the service sector, we still like the metals, we like Newmont , and gold, but, that said, we've had some of these positions for a couple of years, and we're just trading around them. It's not a major re-positioning of the portfolio."
Barry Ritholtz, Fusion IQ CEO & Director of Equity Research
"What we want is a cheap valuation, and moving in the right direction. We've got three sectors doing that right now, still. Health care, staples, and industrials to some extent. If you look at the commodity plays, if you will, the materials, energy, and the other sectors in the commodity space, they're very expensive, but they've been pretty strong. They're starting to lose that momentum, and that looks like a sell signal to me."
Jack Ablin, Harris Private Bank CIO
Eye the Consumer
“A great specific name would be Office Depot . You know the consumer discretionary names have led this decline. We firmly believe that they’ve discounted most if not all the risk in the economy to their business. Office Depot has come down from 40 in change. It’s at $12. We see at least a double in this stock in the next five years. And, we could make a case that it could triple.”
Christopher Zook, CAZ Investments
Build Optimism on Homebuilders
"I'm definitely turning very positive on the big banks here, in the United States, the money-center banks...I'm still positive on the homebuilders; for the first time this year it looks like the S&P Super-composite homebuilders' index is up on the year...I don't want to be in the defensive industries, primarily because too many people have gone into industries as a defensive move and driven up valuations there."
Mike O'Rourke, BTIG Bass Trading Chief Market Strategist