Investors should keep the antacid nearby.
Long-term bull Tony Dwyer sees short-term turmoil in connection with his call for the “summer of indigestion”. So he encourages investors to oppose any big strides now.
“We had a huge run. It was an excessive run in the indices, “Canaccord Genuity’s chief market strategist told CNBC’s” Trading Nation “on Tuesday. “Usually when it’s these kind of indigestion beneath the surface of the market, it eventually comes out in the indices themselves.”
The major indices have just broken a two-day winning streak. But the S&P 500 and Nasdaq hit all-time highs during Tuesday’s session. Plus, the Dow is only 0.58% off its all-time high.
This may be hard for some investors to swallow, but Dwyer believes a summer setback is practically inevitable. He points to a transition phase in monetary, fiscal, economic and earnings policy.
“Everyone’s talking about Peak All. But that’s exactly what is happening at this point in an economic recovery,” said Dwyer. “It’s what happened in 2004. It’s what happened in 2010.”
Dwyer has been on the sidelines for months because of the scenery. In April he downgraded the market to neutral.
“We have been in the summer of indigestion since late March when rates peaked,” he said. “Although the S&P 500 and Nasdaq are making new daily highs, participation in them is much lower.”
However, Dwyer sees a sharp drop as a great buying opportunity.
“The indigestion summer time will create year-end opportunities,” Dwyer said. “We are trying to bring our commitment back into the market from a neutral position on even more of these digestive disorders.”
“You just want to wait for an opportunity”
Dwyer plans to plunge into stocks again amid general market weakness.
“You just want to wait for an opportunity,” he remarked. “Buy in the areas facing economic recovery.”
At the top of his list: Financials, Industrials, Commodities, and Energy.
“They all looked really excessive runs up,” he said. “They have returned all of the relative gains in performance in these four sectors over the past few weeks.”
Dwyer expects more weakness during the dog days of summer. However, he assumes that a slump will create the conditions for a strong upward trend towards the end of the year.
“Last summer we were very positive about the subject of economic recovery and dropped our horns in mid-April,” said Dwyer. “[Now] You don’t want to get too positive or too negative. “
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