Monday, January 23, 2023

Money Can Be Your Friend in The Coming Months

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The increase in stock market volatility could still be in its early stages.

Despite an optimistic prognosis for 2022, Meghan Shue of Wilmington Trust anticipates wild swings to increase as markets assimilate a less flexible Federal Reserve and consider additional risks associated with the Covid omicron type.

On Friday, the firm’s head of investment strategy told CNBC’s “Trading Nation” that “although we’re overweight to equities, we’re maintaining increased cash because we think there will be additional opportunities presenting themselves.” “In the next few months, cash could be your friend.”

The major indices have been losing ground. On Friday, the Dow plummeted 532 points, posting its worst day of the month.

Cash can be your ally in the coming months 3

It dropped 1.9 per cent last week, while the S& P 500 dropped 1%.

(The below image is as of 12/20/2021)

Cash can be your ally in the coming months 1

Meanwhile, the Nasdaq, which is heavily weighted in technology, lost 3% and is now down more than 6% from its 52-week high. The Nasdaq has historically had a harder difficulty coping with rising interest rates and slower GDP.

(The below image is as of 12/20/2021)

“You get a formula for prolonged volatility and a possible correction when you mix it with elevated valuations and then continued uncertainty around omicron,” Shue, a CNBC contributor, said.

In her basic case, equities could correct by as much as 10% in the following two to three months. On the other hand, she refers to it as a buying opportunity.

“Cyclicals and value remain quite appealing,” she stated. “Small caps are similarly battered. And if we do get past the omicron, we might see a rally.”

Shue, who manages $152 billion in assets, is bullish on both domestic and overseas markets. As a result, inflation will stabilize, supply chain pressures will lessen, and labour market participation will increase, according to her firm’s positive 2022 projection.

We’ll be entering the economic cycle’s reacceleration phase.,” she said.

Last month, Shue told “Trading Nation” that her firm has its largest ever stock overweight.

“Stocks [are] projected to continue to be one of the best-performing asset types,” Shue said.

Since the COVID-19 meltdown last year, stocks have generally been on the run. Despite a few setbacks, the S& P 500 index has climbed roughly 110 per cent since bottoming out on March 23, 2020.

We’re due for a reversal, according to history. A stock market correction (a drop of more than 10% but less than 20%) or collapse (a drop of 20% or more) occurred in 11 of the 20 years between 2000 and 2019.

So you could be tempted to wait it out if you’re concerned about your investments losing value. Waiting to buy the dip, on the other hand, may sound enticing if you’re seeking for a buying opportunity.

According to Meghan Shue, you should keep your cash on the sidelines. However, in the upcoming days, there will be more investing opportunities.

According to Shue, the inflation is coming down, and keeping your cash ready to invest when it picks back up is essential. As of now, your will have lower returns since the stock market is on a bear run.

Due to the new Omicron variation, Dow industries has lost about 600 points. So by 2022, you will be able to make higher gains by holding your cash on the sidelines for now.

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