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What the Pros Say: Down, Down, Down

Experts warn that markets look set to test new lows as uncertainty mounts on the fate of the $700 billion Wall Street bailout package, whose cost exceeds that of loans made by the International Monetary Fund since its inception.

WALL STREET IN CRISIS - A CNBC SPECIAL REPORT
WALL STREET IN CRISIS - A CNBC SPECIAL REPORT

Safety On the Sidelines

If you're looking for investments, think about commodities. As far as stocks go, Tim Smalls of Execution LLC tells CNBC's Dylan Ratigan, you really have to wait to see what happens in Washington. The sector that will respond quickest, says Smalls, is the financials, followed by the industrials. And if you're really looking to buy stocks, look for good quality.

Time To Sell Right Now?

"Investing right now is like guessing what's the tax code is going to be," says Diane Garnick of Invesco. And the economic situation around the country isn't making the passage of a bailout package any easier. "For every person unemployed on Wall Street," she says, "there are 22 regular folks unemployed out there." Her advice about what to do with your stocks? "Tax havens are about to expire," Garnick says. "Capital gains are probably not going to go lower. So if you're thinking about selling, do it now."

Going for the Copper

Whether the plan passes or not, we're talking about injecting liquidity and monetary expansion. And that, says Joe Terranova, Phoenix Investment Partners, "is conducive to commidities." Simply put, the dollar will not continue its bullish advance, and that makes commodities a more interesting investment. "I would look at copper. I would look at crude oil. I would look at coal and natural gas prices," says Terranova. Gold, he adds, "is a safe haven as an inflationary hedge." So while you should have it in your portfolio, don't overweight it.

New Lows for Dow

"Right now I think after the bailout package was introduced you can see a really clear signal that the markets aren't happy," Thomas Schroeder, market strategist at Chart Partners Group said, adding that the short covering spike in the markets has ended.

"You still have a downtrend move (for the Dow)… I still look for new lows, coming possibly October."

Credit Markets Frozen

Nobody's lending. The markets are just frozen up and we need a thaw to come in, get the markets working again and then we have something to build on and work with. If we don't get that, I think we're in very, very serious trouble, Michala Marcussen from Societe Generale Asset Management said Friday.

Long-Term De-Leveraging

If a diluted form of the US bailout plan gets passed over the weekend, it will provide some support for the stock markets going forward. But it won't be like the buoyant markets we saw on Thursday, or the extraordinary rally last Friday, Bob Parker from Credit Suisse said.

Parker has reduced his risk on the foreign exchange markets and commodity markets and is focusing on defensive sectors like pharmaceuticals, consumer staples and utilities.

"Irrespective of how this plan works, companies and banks are going to through a long-term period of deleveraging," Parker said.

Short the Industrial Sector

"It is quite literally incredible. The return on equity in the industrial sector is the highest it has ever been, and absolutely no-one is forecasting any serious downturn," Simon Goodfellow, Head of European Equity Strategy Research, ING Wholesale Banking told CNBC on Friday.

"And when the downturn comes it won't just be a small six or 12 months affair, it will be a proper two-year, maybe even three-year affair. This is where the shorting activity should go," he told "Squawk Box Europe."

Hope in Emerging Markets

"There may be opportunities in the US but I wouldn't be going there, cause I think the downside is far greater," Stephen Gollop, CEO of Tyche said, adding that investors should be looking at emerging markets, even if they are likely to fall in the short term.

But, he added, buying is a brave thing to do in the markets at this time.

More Banks to Go Under?

"If the mark down on these troubled assets is greater than 25 percent for the banks

then some of them will go under

," Bob McKee from Independent Strategy told CNBC Friday.

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