US stocks (^DJI,^GSPC, ^IXIC) are mixed in Tuesday’s trading session as investors prepare for a rocky month ahead.
Fundstrat Global Advisors managing director and global head of technical strategy Mark Newton joins Market Domination to discuss market trends and how investors should prepare for the year-end.
Big Bank stocks, in particular, are under pressure after the Federal Reserve proposed new capital requirement regulations for banks that would seek easements on their capital holdings while scaling back other requirements. Newtown notes that financials (XLF) are the second-largest sector in the S&P 500 after technology (XLK), and that today’s movement is "a minor pullback." He highlights that banks have been up about 10% over the last three months, and the pullback is "on the heels of really robust gains in this sector."
Newton finds the broader market picture to be "pretty healthy," pointing to new all-time highs in technology, financials, healthcare (XLV), industrials (XLI), and utilities (XLU). While the tech sector is under pressure, he believes that it has "not broken down substantially enough to think that tech is broken."
"We have this huge amount of contentiousness and divisiveness regarding the election. Of course, two wars overseas. A lot to get us unhappy about. Earnings, though, have been remarkably good, and the stock market itself has been good," Newton tells Yahoo Finance. "So, you know, let’s not get too bent out of shape about, granted, some understandable major pullback in some of the semiconductor stocks. I don’t think it’s been damaging enough to say that the market has peaked out honestly. But it is an uncomfortable time for many investors."
Wall Street is also paying extra close attention to the Federal Reserve as it moves forward with its first interest rate cut, and Newtown anticipates an interest rate cut of 35 basis points. He notes that when the Fed has cut between 25 and 50 basis points historically, it’s been "troublesome."
"My thinking is the market ends the year probably at 5,800 or higher, and the best times of any election year typically tend to be buying weakness into the election November into next spring really should be the sweet spot for investors. So if you want to make money in this day and age, you know, in this time period between now and the election, you have to be very well diversified," Newton says.
He recommends the healthcare sector and financials, calling JPMorgan Chase & Co’s (JPM) stock price — currently around $200 per share — a "steal." He also stresses the importance of being diversified, especially as a broad-based recovery lies for the market after the election.
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