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The word of the year on the US stock market is uncertainty.
The uncertainty surrounding US trade policies, geopolitical tensions and the inclination of the Federal Reserve to reduce interest rates have largely limited stocks this year, after the S & S index P 500 reached an unprecedented high in late April. This has also prompted strategists like Ed Clissold of Ned Davis Research to maintain their year-end goals, while warning that the way ahead could be jerky.
"It's clear the economy is slowing down, but every time we get some bad data, we focus a lot on whether or not we enter a recession," Clissold said. S & P's goal for the end of 2019 is 2950, said Thursday on CNBC's "Futures Now." "If we are not, the market is doing pretty well."
But "pretty good form" means something different for Clissold, Ned Davis chief US strategist who called the stock market tumble 20% in December.
"We think the market will be unstable, and 2950 is what you expect from the S & P in the long run," he said. "But you will get withdrawals and opportunities to get a little more attractive prices over the next few months."
Clissold also monitored market sentiment, which often serves as an indicator of the future course of equities.
"The correction [in] In recent weeks, an excess of optimism has been dissipated, which has allowed the market to reach new heights, "he said. But … if we start to sink into the recession, if we are too far, some rate cuts will not be enough to get us out and then that could be a much more difficult situation. "
As such, Fed officials – who will meet next week – need to be cautious when considering reducing interest rates, Clissold said.
"I think it's unlikely the Fed will make a short-term reduction unless you get worse data," he said. "But here's a quick fix for you – usually the market is showing very good double-digit growth – after the first rate cut, but the last two times it has not done so. only times the Fed cut and then went into recession, so in 2001 and 2007, the Fed tried to save the market, but it was too late, so that's what we want examine. "
Meanwhile, Clissold has recommended investors to opt for stocks that tend to outperform whatever the economic pattern.
"We have low growth – that's what growth stocks like," he said, acknowledging that if the economy went into recession, "defensive" stocks such as utilities, consumer staples and telecommunications names would carry it off.
"But if it's as slow and steady, it's when you want to be in technology and consumer discretionary, the big names in growth," he said.
Shares erased their losses Friday after falling earlier in the session amid concerns over weakening data in China and the difficulties of the semiconductor companies that are seizing the market.
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