Equity markets (^DJI, ^IXIC, ^GSPC) are experiencing a sharp decline on Monday as investors’ recession fears intensify. The CBOE volatility index (^VIX) has surged to a 4-year high. Oppenheimer & Co. Inc. managing director and head of technical analysis Ari Wald joins Catalysts to discuss market outlooks on this broadening market sell-off.
Wald characterizes the current market sell-off as "a pullback in an uptrend." He notes that the VIX’s current level of 65 was "only exceeded during the depths of the Great Financial Crisis and the COVID lows," suggesting a market low could be on the horizon.
For this downturn, Wald recommends plays with "long-term relative strength," favoring the Nasdaq 100 (^NDX) for long-term investors. He advises against small-cap stocks (^RUT): "As we think about the possibility of market breadth, small caps are likely going to be the first to peak."
Regarding a potential Federal Reserve interest rate cut, Wald believes it will likely be a "reactionary cut" at this point, though he anticipates positive market momentum following such a move.
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