CNBC Stock Blog

Brace For 5-10% Market Correction: Portfolio Manager


Markets climbed on Tuesday following some big news in the smartphone industry and on a strong consumer-confidence report. How long will stocks continue to rally? David Hefty, chief executive of Cornerstone Wealth Management, and Sarat Sethi, partner and portfolio manager at Douglas C. Lane & Associates, shared their insights.

“As bearish as I am, you can’t ignore the fact that there’s a tremendous amount of momentum left in this rally,” Hefty told CNBC.

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“Today, we’re making our last buy into the market to be fully invested in anticipation of this next rally forward.”

Hefty said although the economy does not look like an attractive place to invest fundamentally, investors should participate for now because the market continues to rally.

“But if you don’t have a trigger finger ready to pull, you’re better off sitting in cash—you have to know when to get in and you have to be ready to exit, otherwise, you can get caught in the wrong side of the trade,” he cautioned.

In the meantime, Sethi told investors that the markets are ahead of themselves and to brace for a 5 to 10 percent correction.

“For some of the stocks that have appreciated, we’ll get a better chance to buy them in the next couple of months,” he said. “You start buying the industrials when they come back because they’re already projecting great earnings, you also start going after consumer staple companies that are going to outperform in a slower GDP environment.”

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No immediate information was available for Hefty or Sethi.