The latest economic data, from initial jobless claims to retail sales, has allayed investors’ recession fears after the July jobs report sparked a three-day sell-off in the markets. Jill Carey Hall, senior U.S. equity strategist at Bank of America Securities and head of the U.S. SMID Cap Strategy, joins Market Domination to analyze the current state of the market and some of the best strategies ahead of further volatility.
“In this environment, investors want to be selective. We don’t necessarily see upside for the S&P 500 (^GSPC) level. Our year-end target was 5,400. I think in this environment, you want to pick your spots in the market,” explains Carey Hall. She points out that capital spending by the big tech companies is high while earnings are starting to slow. She expects this trend to continue as the other 493 stocks in the S&P 500 gain momentum. As the Federal Reserve begins to cut interest rates, she sees opportunities in equity and dividend stocks.
However, she warns of a bumpy road ahead, saying, “There’s likely to be volatility this season,” especially since the VIX (^VIX) typically rises about 25% between July and November in presidential election years. She adds, “We’re also in an environment where the slope of the yield curve is usually a good indicator of what’s happening with volatility in a leading ratio. So that also suggests that we could see a rise in volatility from the lows starting in the second half of this year.”
Carey Hall points out that the S&P 500 sees 5% declines on average three times a year, with the most recent one occurring in April. “Overall, I think it’s an environment where volatility could persist in the short term and selectivity within the market makes sense,” she tells Yahoo Finance.
Click here to watch the full episode of Market Domination for more expert insights and information on current market events.
This article was written by Melanie Riehl
