- The S&P 500 will see more 3-7% drops and then new highs as it “stairsteps” higher like in the fall of 2009, according to Canaccord Genuity’s chief market strategist.
- In Monday note, Tony Dwyer said that he expected a pullback favouring stocks in the “economic recovery sector,” and investors should add exposure to this theme when pullbacks like last week’s occur.
- Dwyer also said that making an investment decision based on the political landscape “would be simply guessing.”
Investors should expect more drawdowns for the S&P 500 in the 3-7% range before the market “stairsteps” higher like it did in the 2009 recovery, according to Canaccord Genuity’s Tony Dwyer. The chief market strategist said in a recent note that a pullback in favour of “economic recovery” sectors over stay-at-home stocks was expected, and the 7% correction in the S&P 500 over the last week has reflected that theme.
Dwyer added that over the last six trading sessions before Monday, all 11 SPX sectors were negative, with “significant relative outperformance” in economic recovery sectors like industrials, materials, financials, emerging markets, and the Russell 2000 index.
The strategy chief expects further volatility over the coming weeks and months as election uncertainty rises and the coronavirus looms. He said investors should “stick with the stairstep playbook” and add exposure to economic recovery stocks during pullbacks like last week’s. “To make an investment decision based on the political landscape at this point would be simply guessing,” Dwyer said, “So we remain focused on what we know – the continuing pandemic coupled with the lack of further fiscal action means the Fed is likely to reinforce or even accelerate its aggressive monetary policy when it meets this week.”