Business

Bear markets come in three stages; and we’ve only just started the second, says veteran analyst.

Stocks will start half of the Black Friday session near 10-week highs, having rebounded partly on hopes that the Federal Reserve will slow the pace of interest rate hikes pending the extent to which previous tightening has affected the economy affected.

Investors are therefore looking forward to the moment when the Fed is finally up and running and borrowing costs can start to fall again. For now, they are little concerned about the damage an economic slowdown could do to corporate earnings.

It’s all too rosy, says Peter Boockvar, chief investment officer of Bleakley Financial Group. In an interview with Magnifi+, an AI investment and trading platform, the veteran analyst warns that stocks will fall next year and that we have not yet seen the bottom of a mid-stage bear market.

“Bear markets usually have three phases. The first is we’re taking a lot of the frothy excesses and euphoria out of the market in terms of the sexy names we saw in 2021 and we’re driving down a PE ratio. We did that, we went from 22 times earnings, call it 16 to 17,” says Boockvar.

In the second phase, he adds, investors begin to calculate the economic and corporate profit consequences of the continued rate hikes…” and then everyone throws in the towel in the third phase. Nobody wants to own a stock anymore, and that is your bottom and then you have to buy shares hand in hand.

“I feel like we’re just at the beginning of that second phase,” he said.

Still, there will be opportunities. It all depends on your timescale, according to Boockvar.

“If you have a major purchase to make in a year or two, whether it’s a kid going to college or a wedding, a bar mitzvah, or any other expense like a house you’ve set aside money for, don’t be on the stock market. It should be in the bank, it should be in short term T-bills. It should be in cash equivalents because the next few years will be challenging for people with shorter time horizons,” he said.

So, what assets is he interested in? Bonds are attractive, but it’s important to stick to quality.

“You have investment grade bonds that yield 6% and you can do that without taking on a lot of maturity risk by buying shorter maturities… And you can buy a two year short term Treasury bill with a yield of four and a half percent and also get some attractive Munis. So land with a fixed income, with a shorter term, I think is more attractive. Longer-term trading times, I’m even more suspicious about that,” says Boockvar.

And in stocks? “Value stocks are much more attractive than growth stocks, the technology stocks. I think commodities stocks are much more attractive than they have been over the past five years. Certainly energy, precious metals, even industrial metals like copper stocks.”

If the dollar has peaked and then retreats as the Fed approaches the end of its walking cycle, Boockvar likes the look of foreign markets, particularly in Asia, and gold and silver once the central bank begins rate cuts.

Lastly, the one thing he’s definitely not fond of is his former tech darlings. “Just buy Google GOOGL,
-0.57%
and Amazon AMZN,
-0.11%
and Apple AAPL,
-1.62%,
while they are all great companies, that ship has sailed and the baton in terms of market leadership will be passed to other parts of the market,” says the analyst.

Markets

Stocks lined up to begin last week’s trading in the forefront, with S&P 500 futures ES00,
+0.05%
Up 0.2% to 4039 and 10-Year Treasury Yields TMUBMUSD10Y,
3.729%
were little changed at 3.709%. US crude oil futures fell 0.7% to $79.50 a barrel.

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The buzz

It’s half a trading day for Wall Street as many traders are also extending their Thanksgiving break. Expect very thin volumes.

Still, analysts and investors are looking for guidance on how Black Friday sales are going. How is the US consumer holding up despite high inflation and sharp increases in borrowing costs? Shares in Amazon AMZN,
-0.11%
and Walmart WMT,
-0.16%
were relatively stable.

Shares in Tesla TSLA,
+0.32%
are up about 2% in premarket actions despite news that the car company is recalling about 80,000 cars in China.

Activision Blizzard shares ATVI,
-4.20%
are down more than 3% following a report late Wednesday that the Federal Trade Commission could block Microsoft’s purchase of the video game maker.

Fed’s Bullard went on Monday to discuss inflation and interest rates in MarketWatch Q&A. Register here to view the program and ask a question.

China’s central bank eased monetary policy as the country grapples with new COVID-19 outbreaks.

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The graph

Here’s an interesting comment on stock volatility from Benedek Vörös, Director of Index Investment Strategy at S&P Dow Jones Indices.

“It has been a turbulent year, but some relative calm has returned to US stock markets in recent weeks and options market participants look even more relaxed than their cash counterparts,” Vörös writes in his latest bulletin. “VIX, which averaged 3 points above 21-day realized S&P 500 volatility over the past year, is down 6 percentage points since yesterday’s close. Historically, that has had some predictive power for lower volatility.”

Source: S&P Dow Jones Indices

Toppers

These were the most active stock tickers on MarketWatch as of 6am Eastern.

Ticker

Security name

TSLA,
+0.32%

Tesla

GME,
+0.22%

GameStop

AMC,
-0.85%

AMC Entertainment

NIO,
-3.88%

NIO

COSM,
+14.53%

Cosmos Holdings

AAPL,
-1.62%

Apple

MONKEY,
-1.45%

AMC Entertainment is preferred

BBBY,
-1.17%

Bed bath & beyond

AMZN,
-0.11%

Amazon.nl

MULN,
-6.39%

Mullen Automotive

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