What Investors Can Do Until Stocks Rally Again
The summer stock market rally has lost steam, with equities treading water since their mid-September highs. But some market pros expect the rally to resume after this recent pause.
“This has been a relatively low volume rally,” Richard Weil, CEO of fund manager Janus Capital, said in a CNBC interview. “I think it still has legs. I think multiples are reasonable and there’s room to go.”
But investor fears may need to be allayed before stocks move higher. Worried about a potential meltdown in Europe, the U.S. fiscal situation, Mideast tensions and a potential hard landing for the Chinese economy, Weil said investors are sitting on the sidelines.
And those investing in stocks have tended to favor larger, well-known names, Weil said, which have outperformed the broader S&P 500 so far this year.
Indeed, Disney , Home Depot , Anheuser-Busch Inbev , Bank of America, Amazon.com and — of course — Apple are among the big caps that are up more than 40 percent this year. That makes the S&P 500’s nearly 16 percent gain look paltry.
Dividend payers have also performed well as investors flock to yield and safety amid the global uncertainty.
Some strategists are advising investors to stick with the dividend and growth themes. Citigroup’s Tobias Levkovich is advising clients to stay with large caps, stocks with chunky yields and to prefer growth over value.
KKR’s Henry McVey also echoed that call on CNBC, saying investors should seek yield, growth and inflation protection. “As we have bumpy economic growth globally, public investors are going to migrate to those names,” he said. (Read More:20 Stocks With the Potential to Pop.)
Money should also start coming back into the markets as those fund managers that are lagging their benchmarks start putting the cash sitting on the sidelines back to work, Fulcrum Securities’ Rob Morgan told CNBCon Tuesday.
He also said that third-quarter earnings could be the trough. While markets are expecting a dismal reporting season, which gets underway with Alcoa next week, Morgan said “looking out a little bit longer term, earnings estimates are starting to rise a little bit.”