Sam Stowell said the revision would be an opportunity for investors to buy as the central bank is likely to keep rates lower for the next few years.
- Sam Stowell of CFRA said the latest S&P500 bullpen could be converted to a “low-level, dual-digital correction”.
- The chief investment strategist said it was not a “guarantee” but an opportunity for investors to buy as the central bank is likely to keep interest rates low for the next few years.
- Stowell added that the recent S&P 500 sales were not surprising, adding that the “serious” difference between price returns and value values for growth stocks made the market vulnerable.
Sam Stowell, CFRA’s chief investment strategist, said investors should be prepared for additional pressure in the markets, but that should not be a signal to exit.
“It simply came to our notice then S&P500 It will test its 200-day moving average, rather than its 50-day moving average, as it did recently, which could turn this drag into a low-level, dual-digital correction, ”the strategist wrote in a note on Monday.
But Stowell said the fall would be “more of a buy-in than a bailout” as the central bank is likely to keep interest rates lower over the next few years.
At the end of August, the 12-month price for the S&P 500 growth index was 35 percent higher than the revenue value index, the strategist said. “This month-end difference has been vast since these codes were created in the mid-1970s,” Stowell said. “Not surprisingly, this intensity made the market vulnerable to a sell-off that was available on the fewer days around the Labor Day holiday.”
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He said the growth-value gap had narrowed due to the recent September recession, which saw a sharp decline from the S&P 500 growth index. Even before the technology bubble burst, this difference was now equal to December 1999, leading him to conclude that additional pressure might be ahead.
Stowell also noted that at the end of August, CFRA’s industry momentum portfolio S&P500 subsidiaries included computer and electronics retailers and copper. Financial transactions and data and hypermarkets and super centers were eliminated. As of Aug. 31, the portfolio was up 15%, while the S&P equivalent 500 was down 2.6%. According to Stowell, subsidiaries in the top 10% will be added to the portfolio and listed until the top 30% exits, based on 12 months of price returns.