U.S. equities might be out of the bear market but another correction in the autumn remains on the cards, according to David Bianco – the Chief Investment Officer of DWS Americas.
Bianco is all for utilities stocks though
Interestingly, though, he still recommends “utilities” – a sector that’s already up nearly 20% since mid-July for investors interested in playing the “electrification” trade.
Bianco is also convinced the demand for natural gas is here to stay, which makes these stocks an even better pick for the long-term investors. This evening on CNBC’s “Closing Bell”, he said:
Utilities are this underappreciated play on electrification. Electric is the future; utilities are a big player here. Natural gas is critical for this decade. So, high natural gas prices, electrification, inflation protection; I think utilities are a good gift to equity investors.
Why is he cautious on the broader market?
Bianco, however, is not buying the recent surge in the benchmark S&P 500 index (roughly 18% from its low in mid-June) since the macro environment remains unsupportive.
4,300 doesn’t acknowledge the continued slowdown, the likely decline in sequential earnings ahead for the next few quarters. The flows and positioning will follow the fundamentals, which are still tough yet ahead.
He sees a “small” recession ahead as the central bank continues to raise rates likely through early 2023. The Federal Reserve on Tuesday said production at U.S. factories increased in July for the first time in three months.
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