The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) are sinking on Wednesday while small caps (^RUT) are seeing a rebound of more than 10% in the last week. Wall Street Alliance Group Partner Aadil Zaman joins Wealth! to discuss the pullback and how investors should be positioning their portfolios.
"Investors need to be cautious here because the market has gone up so much in such a short period of time. So a correction, in our opinion, is definitely in the cards. And we feel that at this point in time, investors should have some firepower to be able to take advantage of a pullback," Zaman states. He encourages investors to take some profits from their positions in Big Tech stocks and "spread the love into other areas of the market that could potentially benefit from rate cuts."
As the Federal Reserve is likely to initiate an interest rate cut by the end of the year, Zaman notes that overall, "the stock market has a lot going for it." He points to low unemployment and low inflation as positive indicators of a strong economy, adding, "[The] Fed, whether now or whether later, they’re going to cut rates. So we are firm believers that long-term, the market is going to go higher… And also, we feel that with the rate cuts that you mentioned, the breadth in the market is going to improve. So investors should start looking at allocating into other areas of the market, not just focused on 4 or 5 companies in a concentrated way."
He believes that investment banking activity will pick up as the Fed cuts interest rates, presenting a potential buying opportunity for investors. He also points to utilities as a sector with room to grow as the AI race increases the demand for energy. Zaman notes that investing in areas like financials and utilities would protect your portfolio in the event of a market correction.
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