Our name of the day comes from David Donabedian, chief funding officer at CIBC Private Wealth Investment, who tells MarketWatch that the V-shaped market we’ve seen since February — “an almost perfect peak” of a 34% decline adopted by a 41% restoration for the S&P 500
via June — is doubtless over and we’re dealing with a flat market with a lot of volatility within the months forward.
What to do? “After that 41% moonshot for equities, I don’t think this is a market you should chase, it’s also not a market that should be aggressively sold, because of all the liquidity that’s piled up. It comes down to don’t fight the Fed, but don’t chase this market,” mentioned Donabedian.
We’ve moved right into a “different sort of environment, one that is going to be more of a balance between risk and reward,” he says. There’s loads of Federal Reserve help left to feed into these markets, however equities have additionally priced in a variety of “positive outcomes in what is still a very uncertain environment,” he provides.
And whereas it’s straightforward to assemble a fairly bearish view of markets proper now, as earnings collapse and the market seems to be “wildly overvalued,” and COVID-19 information is doubtless to be good and unhealthy, all that liquidity washing round within the financial system and monetary packages handed in Washington are one thing to keep in mind.
“One approach for the long-term investor is to step back and view this market like an investor rather than a short-term trader, and that leads you to some conclusions about which parts of the market are likely to be more profitable over time,” mentioned Donabedian.
After the primary half, elements of the tech and health-care sectors and different choose niches have seen improved long-term development prospect following the COVID-19 chaos, whereas different sectors have fared much less effectively, he notes.
For these investors targeted extra on the brief time period, that in all probability means extra of preparing for some underperforming sectors, at the least quickly, to get better a bit — as was seen in late May and early June, when financials, power shares and industrials rose.
Our chart of the day from the New York Times exhibits how investors utilizing the free buying and selling app Robinhood traded “the riskiest products and at the fastest pace” within the first quarter of 2020 versus these utilizing E-Trade and others:
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