We may be “entering a new bull market,” says a top Oppenheimer strategist.
”We’re in what we think is a near-term base, amid what I think is becoming a longer-term bull market,” Ari Wald, senior analyst at Oppenheimer told Yahoo Finance.
“The decline that we had from February to March, where we dropped 35% over a 20-day period, that was the bear market. Now we think we’re entering a new, a bull market, that I think could continue through the balance of the year, “ said Wald.
There’s been much debate over the last several weeks whether we’ve already seen the bottom of the markets and if there are more panic days ahead.
Wald says investors should pay attention to the tech and health care as sectors. “In general as the base progresses, you’re going to see breadth improve and actually some of these stocks are going to start moving higher. We’re already seeing that in some of the high growth names within tech and health care. I think that’s what you want to stick with,” he added.
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No S&P 500 (^GSCP) sector was spared from the market crash last month amid the spread of COVID-19. But technology, which outperformed into the February market highs, also held up better on the way down into the March lows. Much of the rally in recent weeks has been fueled by big cap tech names.
“They’ve been able to lead both on the upside and the downside … They’ve been able to hold up through this,” said Wald.
Wald says that strength is likely to continue.
“We’re seeing this premium get in place on these high-growth companies in this low-growth world. Those trends look like they’re still intact to us,” said Wald.
“As much as they’ve run over the near term, these are big breakouts from two years of resistance. Some of these are just starting to get going. These are stocks you want to stick with and buy on pull backs,” he added.
Wald advises staying away from the energy sector. “These stocks really just do not screen well for us,” he said. “They’ve been big parts of this decline, not only in 2020, but for several years.”
Energy companies have been forced to slash their capital spending and suspend new projects amid a collapse in oil prices as economies are at a standstill due to COVID-19. This week President Trump tweeted plans to help U.S. gas and oil industry companies, some of which risk going under.
“While some stabilization would be both welcomed and reasonable, we just see more attractive opportunities for funds elsewhere in the market right now,” said Wald.
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Ines covers the US stock market from the floor of the New York Exchange. Follow her on Twitter at @inesreports.
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