Here's what investors are saying and doing about the market's drop

Published Thu, May 5 20222:30 PM EDTUpdated Thu, May 5 20223:04 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Wall Street suffered its worst sell-off of the year on Thursday, sharply reversing the gains following the Federal Reserve decision on Wednesday. Many strategists predicted a possible short-lived relief rally following the Fed news, but the speed and scope of the negative turnaround surprised many on Wall Street. Here is insight from some of the top investors and strategists on the major pullback: Josh Brown, Ritholtz Wealth Management on 'Halftime Report' "If you're trying to be at all tactical, you can only rely on price. You can only rely on technicals. So here's what I would tell you. We're in a defined downtrend for the Nasdaq for a while now. Okay, so tactically, if you're obeying anything like a 10-month moving average or a 200-day moving average or an eight month, whatever the way that you do tactical, if you're at all rules-based — and we run ours rules-based — you're not in Nasdaq in that part of your portfolio. Now the S & P joins the party to the downside. I told you at the end of April, looks like we're going to finish this month below the 200-day, below the 10-month. "You might think those are just squiggly lines drawn on a chart randomly, but I can tell you, price has memory and people remember what price they own something, what price they don't own it, where they're trapping a stock. Price is meaningful. Now you're in a defined downtrend for the S & P 500 with, probably next month, a negatively sloping moving average, which makes it even worse. So if you're doing this in a rules-based, tactical way, you have some semblance of an answer." Paul Hickey, Bespoke Investment Group "This isn't necessarily retail people trading here. There's some heavy pressure on the market. ... Yesterday afternoon we saw a lot of excitement when Powell took 75 basis points at a single meeting off the table, but I think if you were listening to the press conference, it overshadowed some other commentary that hardly painted a rosy picture. At one point, he was saying we had a good chance of a 'soft-ish landing' and then talking about the process of tightening isn't going to be pleasant." "I guess the Fed has become more transparent in its more recent history, but that kind of commentary isn't typically what you hear from a Fed chair talking about the present conditions. I think the market may have gotten a little overextended and happy yesterday, and we're getting a reality check today. The fact is, Powell is right. It's not going to be pleasant here." Adam Crisafulli, Vital Knowledge "The type of volatility witnessed lately causes people to lose perspective (and mind), but it's important not to allow the swift day-to-day swings to infect one's view on fundamentals. Some small signs of disinflation are apparent, and the manufacturing situation in/around Shanghai is actually much better than it was a few weeks ago. Both need to improve even more, but it's ironic that stocks are getting crushed just as two of the three big overhangs (inflation and China/COVID) begin to (gradually) move in the right direction " Pete Najarian, MarketRebellion.com, on 'Halftime Report' "Each and every time I've come on over the past couple of weeks, the producers ask me, 'Hey, are you buying something?' And the answer has been for the most part, 'No'. The only stock that I've added in the last couple of months was Goldman Sachs. ... It makes it a lot more difficult when you've got your list out, and you can see everything around it just crumbling. It means that you've got a little bit more time to just sit back and wait and be a little more patient." Michelle Cluver, portfolio strategist at Global X ETFs "We've seen a huge amount of increased volatility. Yesterday was your best trading day. Today was one of the worst. So it's typically during those periods of volatility that you have some of your best trading days on record. For somebody who's thinking, 'everything's looking terrible, let's just sell everything,' that's the most likely way of losing out on the best days in the market as well, which can have a huge impact on returns." Randy Frederick, Schwab Center for Financial Research "When you see these kind of moves, this kind of reminds me of the crazy stuff we saw during the fall of '08. Not that the macro environment is the same, because it's clearly not. ... This kind of move is extraordinary. With the VIX at 25 yesterday, certainly no one was expecting this." Francois Trahan, Trahan Macro Research "Timing the exact bottom in equity prices, and GDP growth shortly thereafter, is difficult to do at this time because we have yet to see a peak in interest rates. After all, in Fed tightening cycles the S & P 500 tends to bottom about 18 months AFTER a peak in interest rates. Mortgage rates are hitting fresh cycle highs this morning as I write this so we are talking about a bear market that lasts until late 2023 at the very least. That is a LONG time away." David Waddell, Waddell & Associates "We're in a sideways pattern. ... The market needs to psychologically re-test those resistance levels. I don't see this as altogether unhealthy. And when the algorithms move at size, things move quickly. In a sideways market, it's like being in a dinghy with eight-foot waves bouncing you around." "I'm getting excited because so many of the individual issues, if you look below the indices, the P/Es are getting really cheap. You're getting single digit P/Es. I haven't seen those in a while." John Lynch, Chief Investment Officer for Comerica Wealth Management "It's conceivable the S & P 500 needs to establish a bottom in this 3,850 to 4,000 range. Without recession in 2022, which is our base case, stocks can resume higher as equity investors discount cyclical recovery in an environment where monetary policy is no longer shepherding expensive growth and technology names at a multiple of sales. "We continue to position for cyclical recovery and favor value, quality (profitable) small caps, and cyclical sectors including Energy, Industrials, Materials and Financials."

Josh Brown

Adam Jeffery | CNBC

Wall Street suffered its worst sell-off of the year on Thursday, sharply reversing the gains following the Federal Reserve decision on Wednesday.