CNBC Stock Blog

Why You Should Play the Reflation Trade: Stock Picker

Stocks slid on Tuesday but ended off their lows for the day, after the Federal Reserve raised its forecast for 2010. John Linehan, portfolio manager at T.Rowe Price, and Howard Ward, CIO of Gamco Investment Growth Fund, shared their insights.

Market Breakdown

“Most of the data that came out today was as expected,” Ward told CNBC.

“The one piece of data that wasn’t was consumer confidence—that was a couple of points better than expected and I think that was helpful to the overall market.”

Ward does not foresee a stronger dollar: “The dollar is weak because of the policies in Washington. Nothing is changing in Washington, so there’s no reason for the dollar to strengthen.”

Ward likes the reflation trade and said it still has a long ways to go.

“Improving global economic growth, very loose monetary policy, that’s a recipe for reflation—so I like the metals and I like energy,” he said.

“The big techs had a very good earnings season and we see consumers spending on electronics... The major leading companies have guided higher for earnings and I think that’s a good place to be.”

In the meantime, Linehan said he prefers large cap stocks relative to small caps.

“The market’s run a lot and there are a lot of laggards, especially in the large cap side,” he said. “AT&T, Chevron that are well-positioned for renewed growth and they’ll take advantage of the weak dollar and there’s attractive valuation to them.”

Market Point/Counterpoint:

CNBC Data Pages:

CNBC Slideshows:


Tuesday's Top Dow Gainers:

Verizon Communications


Johnson & Johnson

General Electric*

*GE is the parent company of CNBC and


No immediate information was available for Linehan or Ward.