A 6.0% bounce back in the S&P 500 index over the past couple of weeks does not mean start of a new bull market, says NewEdge Wealth CIO.
Stick to quality names
Volatility has been the front and centre of all financial debates in recent months. To navigate the choppiness, Cameron Dawson recommends sticking to companies with strong balance sheets. On CNBC’s “The Exchange”, she said:
Focus on quality at a good price. Companies that can generate strong cash flow, have good balance sheets, have optionality in this part of the cycle. Companies that can deploy capital whether its buybacks or opportunistic M&A.
Much of the market instability, at present, is related to inflation that slid marginally but remained near a forty-year high of 8.30% in April. The 10-year climbed back above 3.0% on Wednesday.
Stocks Dawson endorses
A subsector that meets her criteria is “machinery”. Interestingly, Dawson says these stocks within the industrial space tend to do good in times of inflation. Speaking with CNBC’s Kelly Evans, she noted:
Machinery is trading at reasonable valuation. It’s started to outperform the broader market. It’s also an inflation beneficiary as when commodity prices go up, you see more investment in commodity complex. Machinery companies benefit from that.
Dawson also likes a few of the pharma/biotech names within healthcare for similar reasons. The U.S. Bureau of Labour Statistics is scheduled to report its inflation data for May on Friday.
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