Stocks may hit all-time highs, but Ally Invest’s Lindsey Bell anticipates market turmoil.
According to the company’s senior investment strategist, rising Covid-19 cases and uncertainty about when the Federal Reserve will sensibly step back from its easy money policy could drive stocks into a short-term retreat.
To mitigate potential losses, Bell encourages investors to consider increasing exposure to healthcare.
“It is really underestimated, which is a shame because we are in this great year of innovation with various vaccines and treatments to fight the pandemic,” she told CNBC’s “Trading Nation” on Wednesday. “We remain optimistic that health care can do well especially during times of anxiety that can emerge in the next few months.”
Wall Street breathes a sigh of relief for the time being. The Dow and S&P 500 closed at record highs following the eagerly anticipated consumer price index data. It turned out that inflation wasn’t as hot as many investors fear.
For now, Bell believes inflation is temporary, but suggests it is premature to give the all-clear.
“I see the CPI report today as an asset to the interim camp. But that doesn’t mean we’re not out of the woods yet,” she said. “Time will really tell, and I think we could see inflation get a little hotter by the end of the year.”
Between inflation, the rise in delta variants and seasonal headwinds, Bell warns, it will be difficult for the market to avoid turbulence between now and fall.
“One of the biggest risks remains the Fed. We have the Jackson Hole meeting this month and there is still a question mark about what the Fed will do from a reduction perspective and when rates will rise,” added Bell. a CNBC contributor.
Bell claims that due to new innovations and historical accomplishments, healthcare should be largely immune to any potential impact on the marketplace.
“These companies have grown and increased their cash flows. And the health sector as a whole has outperformed the S&P 500 for a long time,” said Bell. “The thing to remember is that this is a sector that offers a nice dividend and has solid cash flow.”
The Health Care Select Sector SPDR Fund, which tracks the healthcare industry, is up 16% so far this year, up from 18% for the S&P 500.
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