Stocks opened lower on Tuesday, after a sharp rally in the prior session. Where should investors be looking and how should they play the markets? David Spika, vice president and investment strategist at WHG Funds, and Bill Smead, chief executive and chief investment officer of Smead Capital Management, shared their outlooks. (See their stock and sector picks, below.)
“We’re in a multi-year bull market and your wall of worry from a few months ago is still well in place,” Smead told CNBC.
“We think it’s going to be a great market for two or three years for large-cap quality.”
In the meantime, Spika said he is “cautiously bullish.” He called for a leadership rotation into high-quality companies with good fundamentals and revenue growth opportunities.
“The Fed has encouraged a lot of risk-taking with their promise to keep rates low for an extended period, and that’s caused capital to flow into risky lower-quality companies that don’t have earnings growth potential,” he said.
“We need the high-quality companies that can generate revenue in a relatively slow growth environment to be able to take over the leadership, before we can get fully behind this rally.”
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Smead owns MRK, PFE, BMY, AMGN, MYL, ABT, SBUX, DIS, JWN though owning shares of his SMVLX Fund.
No immediate information was available for Spika or his firm.