Investors going long may find the best opportunities in technology and ‘serendipity’ stocks, says strategist James McDonald, CEO of Hercules Investments.
“This is a wonderful time to invest,” McDonald told Yahoo Finance’s The First Trade. “Right now, the leaders in the S&P 500 (^GSCP) are no longer oil companies and big industrial companies. They are tech companies are sitting on hoards of cash.”
The market’s recent rally off the March 23 lows has been fueled largely by mega-cap tech stocks.
“Not only does it look wonderful, but they have the economic power to survive whatever happens with this market sell off. So if you want to buy, you gotta do tech,” had added.
“There’s a concept called serendipity, right? No one saw this virus coming, but there’s companies positioned to take advantage of it,” said McDonald.
He noted that companies like Walmart (WMT) and Netflix (NFLX) have been able to benefit from shelter-in-place measures as people have been ordering online, stocking up on essential items, and watching hours upon hours of streaming content.
McDonald also says there are investments opportunities in health care, although those plays involve more speculation. On Monday, Moderna (MRNA) surged more than 24% on encouraging data about its experimental COVID-19 vaccine. Sorrento Therapeutics (SRNE) also skyrocketed after announcing positive developments related to its anti-body therapy for COVID-19.
[Read More: Stock market news live updates: Moderna coronavirus vaccine fuels rally; Uber braces for new layoffs]
‘A coordination of monetary policy and a coordination of health policy that will bring us back’
On Monday the major averages rallied after Fed Chair Jerome Powell said the central bank is not out of ammunition to help the economy recover from COVID-19.
Though Fed Reserve actions and government stimulus have lifted the markets, McDonald warns the central bank will ease off those measures by the first quarter of 2021.
“When they get to the edge, when they get to the limit of where they can no longer inject liquidity, they’ll pull it off,” said McDonald.
“The Fed does not have an unlimited printing press, but it does have time on its side,” said McDonald.
“People are working hard to get a vaccine, people are working hard to understand how to contain this from a social distancing standpoint … And so it’s going to be a coordination of monetary policy and a coordination of health policy that will bring us back,” he added.
Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre
Put money in the hands of consumers not businesses: NYU Professor Galloway
‘Don’t fight the Fed’ mantra is working: Stifel strategist
It would be unprecedented for a bear market to be this short: Wells Fargo Strategist
Recent rally could be a ‘bear market trap’: Miller Tabak Strategist
Find live stock market quotes and the latest business and finance news