The global economy looks poised to re-accelerate over the next three to six months, but Michael Kantrowitz, CFA and chief investment strategist at Cornerstone Macro, says it’s still too early to.
Kantrowitz is watching earnings, employment, the Fed, and PMIs for indications of a healing economy before buying cyclical stocks.
At this point in the cycle, Kantrowitz believes it’s right to be defensive. He remains bullish on utilities, real estate, staples, and healthcare.
A cyclical rebound is on the horizon, but you want to be cautious until you see leading indicators start to bottom out, Cornerstone Macro CFA and chief investment strategist Michael Kantrowitz told Real Vision’s Trade Ideas.
And because this slowdown began with a Fed tightening cycle, which tends to cause bigger and deeper slowdowns, Kantrowitz said you should be extra cautious.
“Markets aren’t that forward-looking,” he said. “When you look at relative performance of high-to-low beta, or industrials relative to the S&P, or financials relative to the S&P, they trade with leading indicators. Not three months ahead of it, not six months ahead of it.”
“So that means you don't want to be buying cyclical stocks today,” he said. “We're probably going to get a lot of volatility until we see things bottom out.”
At this point in the cycle, Kantrowitz likes a lot of what investors would consider expensive or crowded. His overweight this year has been utilities, real estate, staples, and healthcare.
For now, he recommends treasuries, REITs, utilities, and precious metals.
“You want to remain ultimately defensive,” he said. “Whether or not this turns into a recession or it's just a slowdown, positioning is the same.”
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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