Increased volatility ahead of the elections and last week’s market selloff are opportunities to “lean into that weakness,” says one strategist.
“We think we're in the early stages of an economic cycle, and we think we're in the early stages of a bull market,” Keith Lerner, chief market strategist at Truist/Suntrust Advisory told Yahoo Finance.
On Monday, the markets rallied following the worst weekly loss for the S&P 500 (^GSPC) since March. Big cap stocks like Amazon (AMZN), Apple (AAPL) and Facebook (FB) tried to recover some of their losses from Friday, but dipped into the red again during Monday’s session.
“The VIX (^VIX) ended the month at 38, that's double the level from the last two elections as well. So I think it's just, as we get closer to the election, that anxiety is building up quite a bit,” said Lerner.
He also highlighted anxiety over rising COVID-19 cases, which have prompted renewed lockdowns in Europe recently.
“Volatility doesn't always have to be a negative,” said Lerner. “What we've been telling our investors into October, but even if the next few weeks are a bit choppy, is to lean into that uncertainty.”
Lerner says that earlier this year his strategy was to steer toward growth sectors. Now it is more a “barbell approach between growth and more of the cyclical names.” Specifically, material and industrial stocks.
“I will say that in general, you're seeing more of a cyclical tone, even on a Friday when the markets sold off,” said Lerner.
“One area that we just recently added to our global exchange-traded portfolio was the regional banks, which have been really beat up and trading at about a 40% discount to the overall market. And you are seeing improved earnings and relative price trends,” he said.
As for severely beaten up stocks, such as airlines, Lerner said, “We're not there quite on the airlines as of yet.”
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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