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Sell bear market rallies, especially in growth stocks - BofA

Published 03/14/2023, 09:32 AM
Updated 03/14/2023, 10:01 AM
© Reuters.  Sell bear market rallies, especially in growth stocks - BofA

© Reuters. Sell bear market rallies, especially in growth stocks - BofA

By Senad Karaahmetovic

Bank of America investment & ETF strategist Jared Woodard told the broker’s clients that cash remains the safest place to hide amid heightened market volatility.

“Our preferred asset allocation remains cash > credit > equity > government bonds,” Woodard said in a client note.

In the stock market, investors should be defensively positioned. This means increasing exposure to staples and selling tech stocks “for the bear finale.”

“U.S. households bought $4.4tn of equities the past two years and never sold, an anomaly versus other bear markets; but also sensible while earnings were rising. Falling profits (-9% in ‘23), higher discount rates, and tempting cash yields should spark outflows. Note when lending standards tighten this much, a recession has always followed. Buy staples (IYK) & sell tech (QTEC) for the reset,” the strategist added.

The labor market is unlikely to cool anytime soon given that there is an estimated two million missing workers while excess savings remains very high, Woodard notes.

“Don’t get shaken out of inflation trades. Higher global living standards require more energy from dense, reliable sources. Own the energy of today (XLE) & providers of tomorrow (XME, URA),” the strategist concluded.

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