Relief rally is likely bear market bounce, Wells Fargo says
The recent relief rally in stocks is likely another bear market bounce and investors should position for more choppiness ahead, according to Wells Fargo.
“Year-do-date, the outperformance of defensive, high shareholder payout, high-quality and low-valuation stocks reminds investors of the hallmark of a bear market,” global portfolio and investment strategist Chao Ma wrote in a Monday note.
Such recoveries happen in nearly every bear market and many are quickly reversed, leaving investors with regrets, they added.
“Although it is difficult to predict the bottom of a bear market, in the past, market bottoms were typically preconditioned by over-pessimistic market sentiment and a sign of definitive improvement in the underlying economic or market issue,” Ma said. “We believe we are not there yet in either regard.”
In the meantime, Ma recommends investors look for defensive stocks with low volatility, high dividends and share repurchase yields. He also says investors should go for high quality names with profitability and leading market share and affordable market price.
U.S. stock futures rise ahead of Tuesday CPI report
U.S. stock futures were higher Monday night as Wall Street looks ahead to the August consumer price index report set to be released Tuesday morning. The report will give investors an update on the inflation situation in the U.S. and is one of the last pieces of data the Federal Reserve will see ahead of its September meeting.
Dow Jones Industrial Average futures gained 55 points, or 0.17%. S&P 500 and Nasdaq 100 futures climbed 0.18% and 0.21%, respectively.