Henry McVey was "not really" surprised by the recent market meltdown. But then, the chief U.S. investment strategist for Morgan Stanley says he'd seen the omens in January. He joined CNBC's Maria Bartiromo to discuss what might come next--and how he's preparing for it.
Speaking on "Closing Bell," McVey said that over a month ago, he detected that the market was "overbought"--and noted the high leveraging of hedge funds. Mix in a growth downturn leading to credit problems, and the signs of a market plunge were all there.
The strategist also cautions that history shows "we haven't finished the correction yet" -- and he expects the market to "test the lows one more time" and "put in a bottom" this spring.
So how is McVey's firm dealing with market turbulence? He told Bartiromo that Morgan Stanley's asset allocation is triaged into:
He did not specify percentages for the smaller segments, but said it was a good idea to have more cash on hand for market moves.
Specifically, the strategist says health care has been shifted to overweight; they're trimming back on diversified financials; and he touts "boring old insurance companies that no one pays attention to" -- which, he says, have sound long-term potential.
As to Friday's employment report, McVey takes a middling view: he predicts the market "won't get a 'good news rally' off jobs" -- but on the other hand, he doesn't see a recession.
"We see 5% [growth], more or less," he augured, but "recession talk is just that -- talk."