Stocks broke out of choppy trading by Thursday afternoon to trade sharply higher as investors interpreted economic data and tech tried to rebound from the September sell-off.
Five market strategists and portfolio managers explain why they are bullish on the market long term despite the current volatility.
Jim Paulsen, chief investment strategist at Leuthold Group, sees a breakout in the fourth quarter.
“We’ve got really strong momentum coming into the fourth quarter. And, I think a couple of things that are really good — one of them is the stimulus that has already been introduced here over the last year, and don’t forget this is unprecedented and massive stimulus, takes about a year to start working really and maybe we’ll start to see some of that start to work here in the fourth quarter a little bit as well. And then, of course we could have vaccine or treatment news coming out in the fourth or even in the first quarter. I think we’re not going to shut this recovery down and we’re going to turn out to alleviate some fears that we’re going to roll over again. And if we do that, then I think some of the leadership shift that’s already going on toward the more broader marketplace — small caps, cyclicals, international stocks — I think that’s going to broaden and continue as we move into the fourth quarter.”
Jim Keenan, chief investment officer at BlackRock Global Credit, says to watch out for volatility.
“I think obviously volatility is going to come back into the market and we’re seeing that now just because the rate of change of the recovery and the V-shape off those March lows is starting to slow down but, as you said, we’re at a period of time right now as we get into the election, there’s a lot of uncertainty about what that means, what’s going to be the outcomes, what shifts in policy we might see … I think if you look through this and look longer term, you’re still at a point where the data around hospitalization rates, fatality rates and vaccines or treatments is getting better. And I think regardless who wins the election, you’re still coming into it [with] a policy that will be accommodative and supportive for economic growth.”
Gabriela Santos, global market strategist at JPMorgan Asset Management, lays out her approach to portfolio management.
“We have a positive view on the direction of risk assets in the medium-term. For equities, we still think we’re in a structural bull market and at the beginning of a cyclical bull market. The data is moving in the right direction, and we expect to have plenty of policy support for the first few years of this recovery, but we would very much agree that volatility is still in the cards for the next few months. There’s a lot of event risk around the election, there’s positioning risk affecting the leaders of the rally, and there’s some fundamental concerns around fiscal policy and the virus. So I think you do still want to be overweight risk assets, but you want to be careful with position sizing and you want to balance that with some diversifiers on the other side as well.”
Tony Coniaris, portfolio manager of the Oakmark Select Fund, sees opportunity to pick stocks.
“We’re finding great opportunities in a market like this which is really bifurcated between the haves and have-nots from a valuation perspective. There’s just a lot of dispersion today, and it’s a ripe environment for us to be picking stocks.”
Brian Belski, chief investment strategist at BMO Capital Markets, sees the Federal Reserve stepping in in the absence of federal stimulus.
“I would not put it past Congress to get something done, number one, but more importantly, with respect to what the Fed has said, and if you read between the lines in terms of their language, they stand at the ready. It’s more about what you do versus what you say, quite frankly, in life and in investing in general, and the Fed stepped up in March when the government was kind of being wishy-washy. We think that they’re prepared to step up again so the market, we think, can continue to go up without stimulus.”
