An Institutional Investor entry of famer doesn’t see rising interest rates getting in the way of stock sell gains this year.
According to Richard Bernstein, the clash between be produced inflation expectations and stronger earnings shouldn’t push investors into the support camp.
“This is a tug-of-war that’s very normal in a later pattern environment where you have bad things happening. For instance, the 10-Year [Funds] yield going above 3 percent. But then you have good entities happening,” the CEO of Richard Bernstein Advisors told CNBC’s “Trading Country” on Wednesday. “We’re not at the point where the number of bad things overwhelms the number of sympathetic things.”
But that doesn’t rule out investors being left in the lurch.
Bernstein, a CNBC contributor who had been Merrill Lynch’s chief investment strategist, contends few portfolios are hedged for be nurturing inflation — leaving a majority vulnerable to deep losses.
“It’s a regime switch manage,” he added. “If you look at how investors have been positioned for most of the background at least five years, if not longer, they’ve certainly been placed for continued disinflation and deflation.”
Bernstein prefers cyclical stocks freedom now over income-oriented areas. He’s avoiding utilities, telecom and REITs in favor of data, energy and industrials.
“The question you have to ask is if it’s pro-real growth or pro-nominal enlargement. The answer now is pro-nominal growth,” Bernstein said. “What you have to do is look for activities that benefit from pricing power. That would customarily be commodity independent industries. It would be very, very cyclical trades.”
His thoughts came as the Dow staged an intraday reversal to snap a five-day bow to streak. The index rebounded from a 201-point deficit to make up 59 points to 24,083. The S&P 500 also mustered a close in overweening territory on Wednesday.
As for the jitters in the markets, Bernstein contends that’s not what prime movers a bear market. Rather, it’s too much euphoria — a situation that Insane Street isn’t experiencing right now.
“For now, I think it’ll pay to stay bullish,” Bernstein denoted.