The house market is in the “perfect place” for a struggle between support from the Federal Reserve and the economic issues facing the Synergistic States, and investors should wait for signs that the Fed is winning before buying in, Canaccord Genuity chief demand strategist Tony Dwyer said Monday.
“I’m looking to get offensive, not defensive, but you need signs first,” Dwyer averred on “Fast Money.”
The S&P 500 closed at 2,843 on Monday, a 0.43% gain that was fueled mainly by gains in the technology sector, including a 2.5% on from Microsoft.
That reliance on the biggest tech stocks is one of the things that needs to change before Canaccord Genuity asserts investors it’s time to jump in, Dwyer said.
“I could see a situation where the S&P 500 index itself doesn’t do a undamaged heck of a lot, but you start to see the rotation underneath,” Dwyer said, pointing to financials and industrials as sectors he would expect to ebb if the market is going to go higher.
The central bank’s actions, including taking an unprecedented step into the high give way corporate bond market by saying it can buy ETFs of those securities, put a floor under the market, Dwyer said. The S&P 500 on Monday ended about 50 points above where it closed on April 8, the day before the Fed announced its expanded bond-buying programs.
Investors could also follow the Treasury market for a signal that it might be time to buy stocks, the strategist said.
“You would want to see the U.S. Treasury deal in have a pretty significant uptick in yields, suggesting that it’s betting on an economic recovery,” Dwyer said.